CGAP undertook a scenario-building exercise to help anticipate and prepare for the global demographic, political, and technological forces that will shape the future of microfinance. We and a wide range of outside experts grappled with the potential impact of these forces in order to craft positive and negative scenarios for the year 2015 that might instruct the microfinance actors today.
Diverse channels are needed to get diverse financial services into the hands of a diverse range of people who are currently excluded. Making this vision a reality entails breaking down the walls—real and imaginary—that currently separate microfinance from the much broader world of financial systems.
Around the world, the microfinance community is paying more attention to consumer protection. Controversial topics, such as high interest rates and the overindebtedness of borrowers, have raised public concern for poor consumers in countries far and wide, from Bolivia to Bangladesh to South Africa and beyond. Yet relatively little is known about how consumer protection might apply to financial services for the poor.
This Occasional Paper outlines the rationale for higher microcredit interest rates, the historical performance of subsidized lending, and the impact of interest rate ceilings on microfinance clients. It includes recommendations for fostering lower microcredit interest rates through competition and consumer protection without imposing interest rate ceilings.
CGAP developed and field tested an activity-based costing tool to help MFI managers understand and analyze individual product costs, especially administrative/organizational costs. Once a product's costs are determined, the tool suggests methods for understanding why and how the costs were incurred and how the product contributes (or not) to the overall financial viability of the MFI.