This Focus Note first describes the challenges of the broader financial inclusion landscape and then explores three promising roles government can play in developing more financially inclusive ecosystems.
The growth in online lending and investment platforms presents an opportunity and a challenge for MFIs intent on tapping the potential of online lenders or investors. This paper focuses on the demand side of the equation and highlights issues that MFIs may want to consider before signing up for a loan from an online lending platform.
This Focus Note presents conclusions from a performance review of dozens of CMLF projects established or supported by donors and international nongovernment organizations (NGOs) over the past 15 years. It turns out that success is strongly linked to the source of funding for the loans group members receive.
There is a vast potential market for retail financial services among low-income clients, and a growing number of commercial banks have successfully entered this market. These are the findings of recent research undertaken by CGAP, the global resource center for microfinance supported by a syndicate of 30 multilateral, bilateral, and private donors.
Microfinance products tend to be uniform across large geographic areas. For example, in Bangladesh most microfinance institutions (MFIs) offer some variant of the product pioneered by Grameen Bank—a loan with a term of about a year, repaid in frequent (usually weekly) installments, given in a group context, ostensibly for micro-enterprise use, and with a compulsory savings element.
As the microfinance industry matures, service providers are increasingly concerned with developing new and better products. This focus on new product development is a response to growing competition in the microfinance market, the search for more defined market niches, and some anxiety about dropout rates.
Understanding client exit and nonparticipation can shed important light on the financial service preferences of clients and help programs learn about the limitations of their existing products and mechanisms. Such lessons can drive the development of innovative, demand-driven microfinance products and systems, benefiting both the institution and the clients.
In April 1997, the CGAP Secretariat launched an experiment called the CGAP Pilot Microfinance Capacity-building Initiative in Africa. The initiative spanned East and West Africa and focused primarily on working with African training institutes to provide financial management courses to microfinance institutions (MFIs). The Pilot Initiative sought to build the foundation for the development of a market for quality training and technical assistance services offered on a sustainable basis in the region.