Microfinance

Increasing financial access for traditionally underserved population, including women, poor households, vulnerable groups, and micro, small, and medium enterprises is critical to achieving inclusive and balanced economic growth.

ADB has been actively promoting innovation and best practices in this area. In its Strategy 2020, ADB says it will seek to create an enabling environment for financial inclusion, encompassing rural finance institutions and micro, small, and medium enterprises and explore new technologies to expand access to financial services. Further, the Financial Sector Operational Plan details the work ADB will do in the sector, recognizing that financial services should go beyond micro loans to include savings, payments and remittances, insurance, and pensions.

ADB’s support for inclusive finance is provided through loans, credit lines, investments, grants, guarantees, and technical assistance in the following areas (as defined in the 2014 Project Classification System):

  • microfinance
  • credit cooperatives and credit unions
  • agriculture finance and rural microenterprise
  • branchless/mobile banking
  • financial literacy and consumer protection
  • remittance management
  • savings mobilization
  • rural banks

ADB’s Microfinance Development Strategy ensures access to institutional financial services for a majority of poor and low-income households and their microenterprises. It aims to support the development of sustainable microfinance systems that can provide diverse, high-quality services.

To achieve its objective for microfinance, ADB focuses on:

  • creating a microfinance-friendly policy environment
  • developing financial infrastructure
  • building viable retail institutions
  • supporting pro-poor innovations
  • supporting social intermediation

ADB’s microfinance projects by thematic area

 

Institutional development

To achieve sector sustainability and expand outreach to more poor households, it is necessary to build up the capacity of institutions promoting financial inclusion. Strong institutions must be well governed and render quality financial services to their clients.

Besides supporting the development of existing institutions, ADB also supports the establishment of microfinance institutions in countries where there are few such services.

Below are some ADB inclusive finance projects related to institutional development.

Approval Number Type of Project Country Title of Project Amount (US$) Approval Date
9010 TA THA Strengthening Specialized and Semi-Formal Financial Institutions to Support Financial Inclusion 1,500,000 8 Dec 2015
8932 TA PRC Pilot Program for Establishing a Support Framework for Sustainable Village Community Funds 300,000 21 Jul 2015
8861 TA REG Sustainable Financing of Small-Scale Agriculture in South Asia and Southeast Asia 750,000 23 Dec 2014
8762 TA TIM Expansion of Financial Services 750,000 20 Nov 2014
8391 TA VIE Strengthening Microfinance Sector Operation and Supervision 1,000,000 21 Jun 2013
8336 TA VAN Expansion of Rural Financial Services 225,000 15 Feb 2013
9170 Grant KGZ Women's Entrepreneurship Development 1,500,000 14 Jan 2013
8224 TA INO Improving Access to Finance in Aceh and North Sumatra 800,000 8 Nov 2012
2877 Loan VIE Microfinance Development Program - Subprogram 1 40,000,000 5 Jul 2012
7777 TA NEP Improving Access to Finance Sector Development Program 600,000 27 Jan 2011
9153 Grant BAN Institutional Support for Migrant Workers' Remittances 2,000,000 18 Jan 2011
7765 TA PRC Capacity Development of Partner Banks in Microfinance Wholesale Lending 225,000 29 Dec 2010
9152 Grant MON Promoting Inclusive Financial Services for the Poor 2,500,000 17 Dec 2010
7685 TA REG Market Study for a Non-Sovereign Microfinance Funding Initiative 135,000 29 Nov 2010
2686 Loan PNG Microfinance Expansion 13,000,000 28 Oct 2010
226 Grant PNG Microfinance Expansion 6,000,000 28 Oct 2010
2634 Loan UZB Second Small and Microfinance Development 50,000,000 21 Apr 2010
2617 Loan IND Micro, Small, and Medium Enterprise Development 50,000,000 26 Feb 2010
7499 TA VIE Microfinance Sector Development Program 500,000 21 Feb 2010
9140 Grant VIE Formalizing Microfinance Institutions 1,500,000 5 Oct 2009
9105 Grant PAK Microfinance for the Poorest 2,000,000 30 Jan 2007

As of 30 Jun 2016

Financial market infrastructure development

Adequate financial infrastructure has been a major issue in the finance sector of countries in Asia and the Pacific. This includes legal, information, and regulatory and supervisory systems for financial institutions and markets. This is one of the focus areas of ADB’s microfinance strategy. Specifically, ADB focuses on information systems and training facilities for financial inclusion development, improvement of supervisory regulations, and development of the self-regulation and performance standards of institutions.

Below are some ADB inclusive finance projects related to financial market infrastructure development.

Approval Number Type of Project Country Title of Project Amount (US$) Approval Date
8532 TA MYA Financial Sector Reforms (Supplementary) 350,000 22 Dec 2015
9010 TA THA Strengthening Specialized And Semi-Formal Financial Institutions To Support Financial Inclusion 1,500,000 8 Dec 2015
8861 TA REG Sustainable Financing Of Small-Scale Agriculture In South Asia And Southeast Asia 750,000 23 Dec 2014
8587 TA VIE Supporting Microfinance Development 600,000 12 Dec 2013
8391 TA VIE Strengthening Microfinance Sector Operation and Supervision 1,000,000 21 Jun 2013
8336 TA VAN Expansion of Rural Financial Services 225,000 15 Feb 2013
9170 Grant KGZ Women's Entrepreneurship Development 1,500,000 14 Jan 2013
8250 TA REG Improving Financial Inclusion in Asia and the Pacific 750,000 6 Dec 2012
8224 TA INO Improving Access to Finance in Aceh and North Sumatra 800,000 8 Nov 2012
8108 TA VIE Supporting Microfinance Development Program 500,000 5 Jul 2012
2877 Loan VIE Microfinance Development Program - Subprogram 1 40,000,000 5 Jul 2012
7998 TA THA Development Of a Strategic Framework for Financial Inclusion 1,500,000 15 Dec 2011
7777 TA NEP Improving Access to Finance Sector Development Program 600,000 27 Jan 2011
9153 Grant BAN Institutional Support for Migrant Workers' Remittances 2,000,000 18 Jan 2011
7765 TA PRC Capacity Development of Partner Banks in Microfinance Wholesale Lending 225,000 29 Dec 2010
9152 Grant MON Promoting Inclusive Financial Services for the Poor 2,500,000 17 Dec 2010
7685 TA REG Market Study for A Non-sovereign Microfinance Funding Initiative 135,000 29 Nov 2010
2686 Loan PNG Microfinance Expansion 13,000,000 28 Oct 2010
226 Grant PNG Microfinance Expansion 6,000,000 28 Oct 2010
2634 Loan UZB Second Small and Microfinance Development 50,000,000 21 Apr 2010
2617 Loan IND Micro, Small, and Medium Enterprise Development 50,000,000 26 Feb 2010
7499 TA VIE Microfinance Sector Development Program 500,000 21 Feb 2010
9140 Grant VIE Formalizing Microfinance Institutions 1,500,000 5 Oct 2009
9105 Grant PAK Microfinance for the Poorest 2,000,000 30 Jan 2007

As of 30 Jun 2016

Remittance and payment services

Remittances are potential drivers of a country’s economic growth and development. They can reduce poverty and help raise household expenditures on higher education and health. But remittances can also have negative effects. If not channelled through the formal system, remittances can be the source for money laundering, smuggling, terrorism, and other illegal activities.

While the volume of remittances channelled through banks and money transfer companies—formal remittances—is rapidly increasing, a large proportion of remittances are still transferred through informal channels. This is due to a combination of factors, including limited financial sector development, regulatory barriers, inadequate financial literacy, and poor market competition. ADB projects focus on capturing a larger volume of the remittances in the formal financial system through the use of technology and financial innovations.

Below are some ADB inclusive finance projects related to remittance and payment services.

Approval Number Type of Project Country Title of Project Amount (US$) Approval Date
9153 Grant BAN Institutional Support for Migrant Workers' Remittances 2,000,000 18 Jan 2011

As of 30 Jun 2016

Microfinance funding

Funding is a vital element in rolling out projects that will improve access to finance and ensure sustainability in the finance sector. The bulk of microfinance funding is direct, which supports portfolio growth of microfinance institutions.

Microfinance funders may be private or public. Public funders, such as bilateral and multilateral agencies, development finance institutions, and local government, are motivated by development and social objectives. Private funders, which include private and institutional investors, foundations, and nongovernment organizations, may have business or profit motives, in addition their social goals.

Below are some ADB inclusive finance projects related to microfinance funding.

Approval Number Type of Project Country Title of Project Amount (US$) Approval Date
7325 / 2855 NLE PRC Microfinance Wholesale Lending Facility 20,000,000 28 Mar 2012
7325 NLE REG Microfinance Risk Participation Program 190,000,000 13 Dec 2010
2634 Loan UZB Second Small and Microfinance Development 50,000,000 21 Apr 2010

As of 30 Jun 2016

Branchless banking and digital finance

Branchless banking and digital finance have reduced the cost of delivering financial services and increased the convenience of accessing them. These technological and business model innovations have facilitated the delivery of financial services outside conventional bank branches. The use of agents and information and communication technology (such as POS terminals, mobile applications, and services), have addressed the challenges associated with putting up physical bank branches or requiring rural customers to travel to urban areas.

While branchless banking and digital finance promote financial inclusion, they carry risks. These include reliability of the technology, inaccurate recording of transactions, and inadequate data privacy and protection, among others. For these innovations to be successful, an enabling regulatory environment must be in place that will balance financial inclusion with financial stability and consumer protection.

Below are some ADB inclusive finance projects related to branchless/mobile banking.

Approval Number Type of Project Country Title of Project Amount (US$) Approval Date
9067 TA REG Promoting Financial Inclusion through Financial Technology 750,000 23 Dec 2015
8723 TA SOL Strengthening Financial Inclusion 600,000 24 Sep 2014

As of 30 Jun 2016

Financial literacy

Financial literacy is the ability to understand basic information about financial products and services, while financial capability refers to the ability to apply financial knowledge and understanding. This is particularly important for poor households that are more vulnerable to future economic shocks and need greater protection from fraud. ADB supports financial awareness building among poor households and basic literacy training to access formal financial services.

Below are some ADB inclusive finance projects related to financial literacy.

Approval Number Type of Project Country Title of Project Amount (US$) Approval Date
8532 TA MYA Financial Sector Reforms (Supplementary) 350,000 22 Dec 2015
8768 TA THA Advancing National Financial Literacy 500,000 25 Nov 2014
8723 TA SOL Strengthening Financial Inclusion 600,000 24 Sep 2014
9170 Grant KGZ Women's Entrepreneurship Development 1,500,000 14 Jan 2013
8250 TA REG Improving Financial Inclusion in Asia and the Pacific 750,000 6 Dec 2012
8108 TA VIE Supporting Microfinance Development Program 500,000 5 Jul 2012
2877 Loan VIE Microfinance Development Program - Subprogram 1 40,000,000 5 Jul 2012
8108 TA VIE Supporting Microfinance Development Program 500,000 5 Jul 2012
7998 TA THA Development of a Strategic Framework for Financial Inclusion 1,500,000 15 Dec 2011
9153 Grant BAN Institutional Support for Migrant Workers' Remittances 2,000,000 18 Jan 2011
7765 TA PRC Capacity Development 0f Partner Banks in Microfinance Wholesale Lending 225,000 29 Dec 2010
9152 Grant MON Promoting Inclusive Financial Services for the Poor 2,500,000 17 Dec 2010
226 Grant PNG Microfinance Expansion 6,000,000 28 Oct 2010
2686 Loan PNG Microfinance Expansion 13,000,000 28 Oct 2010
9105 Grant PAK Microfinance for the Poorest 2,000,000 30 Jan 2007

As of 30 Jun 2016

Financial consumer protection

Consumer protection is one of the vital policy objectives of inclusive finance. Transparency, fair treatment, and effective recourse must be considered in ensuring financial consumer protection. Effective regulations protecting the welfare of consumers are necessary to lower the risks for poor households, which are inexperienced in and have little knowledge of finance. The government plays an important role in regulating inclusive finance players and enforcing measures to ensure their competitiveness and transparency.

Below are some of ADB's inclusive finance projects related to financial consumer protection.

Approval Number Type of Project Country Title of Project Amount (US$) Approval Date
8532 TA MYA Financial Sector Reforms (Supplementary) 350,000 22 Dec 2015
8250 TA REG Improving Financial Inclusion In Asia and The Pacific 750,000 6 Dec 2012
8108 TA VIE Supporting Microfinance Development Program 500,000 5 Jul 2012
2877 Loan VIE Microfinance Development Program - Subprogram 1 40,000,000 5 Jul 2012
7998 TA THA Development Of A Strategic Framework for Financial Inclusion 1,500,000 15 Dec 2011
7765 TA PRC Capacity Development 0f Partner Banks in Microfinance Wholesale Lending 225,000 29 Dec 2010
226 Grant PNG Microfinance Expansion 6,000,000 28 Oct 2010
7499 TA VIE Microfinance Sector Development Program 500,000 21 Feb 2010

As of 30 Jun 2016

Gender

Women may have very limited control over household financial affairs and can be dependent on their husbands’ access to financial services. Addressing the gender issue in financial inclusion is more than just formulating projects that target women as a market. These projects should aim to elevate the role of women in the society to be at par with male clients. ADB's inclusive finance projects focus on helping women increase their financial literacy, access financial services and products, and participate in financial activities.

Below are some of ADB’s inclusive finance projects related to gender.

Approval Number Type of Project Country Title of Project Amount (US$) Approval Date
8480 TA UZB Improving Rural Small Business Access to Finance 500,000 1 Oct 2013
9170 Grant KGZ Women's Entrepreneurship Development 1,500,000 14 Jan 2013
9153 Grant BAN Institutional Support for Migrant Workers' Remittances 2,000,000 18 Jan 2011
9152 Grant MON Promoting Inclusive Financial Services for the Poor 2,500,000 17 Dec 2010
226 Grant PNG Microfinance Expansion 6,000,000 28 Oct 2010
2634 Loan UZB Second Small and Microfinance Development 50,000,000 21 Apr 2010
2617 Loan IND Micro, Small, and Medium Enterprise Development 50,000,000 26 Feb 2010

As of 30 Jun 2016

Related areas

Microinsurance

Microinsurance protects the poor from the impact of possible crises and unexpected shocks, such as death in the family, illness, or natural calamities. The target clients of microinsurance are typically those who are unable to afford traditional insurance products, with microinsurance premiums tailored to the living standards of the clientele. ADB supports projects that strengthen the capacity of government regulators and microinsurance providers in developing member countries.

Below are some ADB inclusive finance projects related to microinsurance.

Approval Number Type of Project Country Title of Project Amount (US$) Approval Date
7998 TA THA Development of a Strategic Framework for Financial Inclusion 1,500,000 15 Dec 2011

As of 30 Jun 2016

Green finance

Green finance describes a broad range of funding services for environment-oriented technologies, projects, industries, or businesses. This includes products such as credit cards, loans, and insurance that encourage customers to use more sustainable, environment-friendly practices.

Below are some ADB inclusive finance projects related to green finance.

Approval Number Type of Project Country Title of Project Amount (US$) Approval Date
0346 Grant TAJ Access to Green Finance 10,000,000 25 Jun 2013
8394 TA TAJ Access to Green Finance 750,000 25 Jun 2013

As of 30 Jun 2016