Microfinance: Financial Services for the Poor
Updated: 8 September 2008
Microfinance plays a significant role in ADB's overarching goal to reduce poverty
in Asia and the Pacific. Providing access to microfinance can prove to be an effective
way of reaching the poor -- and improving their lives.
Microfinance is the provision
of a broad range of financial services such as
- deposits
- loans
- payment services
- money transfers
- insurance to poor and low-income households
and their microenterprises
- formal institutions - i.e. rural banks and cooperatives
- semiformal institutions - i.e. nongovernment organizations
- informal sources - i.e.
money lenders and shopkeepers
Institutional microfinance includes
microfinance services provided by both formal and semiformal institutions. Microfinance
institutions are institutions whose major business is the provision of microfinance
services.
About 90% of the 180
million poor households in the region still lack access to institutional financial
services. Most formal financial institutions deny the poor financial services
because of
- perceived high risks
- high costs involved in small transactions
- the poor's inability to provide marketable collateral for
loans
ADB, through its Microfinance
Development Strategy, aims to ensure permanent access to institutional financial
services for the region's poor people and their small businesses.
To achieve this objective, ADB will focus on
- creating a microfinance-friendly
policy environment
- developing financial infrastructure
- building
viable retail institutions
- supporting pro-poor innovations
- supporting
social intermediation
Providing the poor with improved facilities to save and to have better access
to credit and insurance helps them manage risk, build assets, increase income,
and enjoy a better life.
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