Microfinance Approach Research Articles

Integrating Biodiversity Conservation with Poverty Reduction: a Socioeconomic Perspective

Integrating Biodiversity Conservation with Poverty Reduction: a Socioeconomic Perspective

The IVDP — credit to the women of Krishnagiri and Dharmapuri

This paper tracks the organizational and financial history of the Integrated Village Development Project (IVDP) and the self-help group (SHG) network it supports in Tamil Nadu, India. It describes how the network is connecting and negotiating with a variety of formal sector institutions, paving the way towards aligning the “informal” demands of the peri-urban poor and the “formal” sphere of financial institutions, while releasing women from the clutches of moneylenders. The sheer scale of this collective approach has broken through the financial limits of traditional microfinance approaches, demonstrating to banks that poor people can manage their finances effectively and reliably. Currently, the IVDP—SHG network of 100,500 poor women has saved, accessed and revolved the equivalent of UK£ 89.9 million. The IVDP has further leveraged these financial “formal” and “informal” sources in order to integrate low-income housing and infrastructure finance within its overall credit portfolio. This paper highlights and shares the lessons from the network's experience.

Microfinance approaches the bond market – the cases of Mibanco and Compartamos

Corporate bonds are become a growing source of funds in developing countries generally, and microfinance institutions (MFIs) are starting to gain access to them. This paper discusses the experience of two leading MFIs that have been able to access local markets by issuing bonds: Mibanco, a commercial microfinance bank in Peru, and Compartamos, a finance company in Mexico that now has the largest number of borrowers in the Americas. The reasons for selling bonds are described, as well as the prerequisites for accessing these markets, such as a solid performance record, and the help of a number of external players such as rating agents. The bond issues of both of these organizations were successful, resulting in a very significant fall in the overall cost of the funding.

Microfinance institutions in the development of financial markets

For the last two decades, microfinance has ranked high on the lust of policy instruments for fighting poverty. Supporting the creation of access to formal financial services for low-income households holds out the promise of improving the living conditions of poor families and fostering economic development. Furthermore, it is claimed to be a very cost-effective approach because some non-governmental organizations (NGOs) that have been upscaled into microbanks have shown that financial services can be offered to low-income households while covering costs and even earning a moderate profit. Recent studies, however, are sceptical about the high expectations raised by the microfinance approach, since profitable microfinance institutions (MFls) are the exception rather than the rule. Institutional innovation Is called for in order to reproduce these rare successes on a laiger scale. This article aims to offer preliminary’ insights into the potential of two rather new institutional alternatives to upscaling: the creation of microfinance departments at existing for-profit banks (i.e., downscaling) and the founding of greenfield banks.