What challenges do poor people face that prevent them access to formal sector banking

institutions?

Very few have accts Limited access

Formal credit Credit cards

Lack of banks in rural areas Bank usage limited Mobile phone transactions¤

What is the objective of microfinance and microfinance institutions (MFIs)?

Lending to poor Offer other services Empower women

How does it work?

Individual or group loan Community clubs

Weekly meetings

What are the pros of microfinance?

Poor – access to banking, credit, services Loans to start businesses Empower women Employment Alternative to moneylenders Offers choices Stability¤

What problems are associated with microfinance?

Monitoring, collection Interest rates Expensive to get started Shady schemes Often doesn’t lead to increased household

income or consumption Use women to get credit Loan size negligible High risk Diff. to challenge macro-level w/ micro-level

approach¤

Problems (cont.)

Lack of effective national governanceLack of infrastructureLack of demand / buying power in

communityLack of business variety Lack of business-building¤

Recap

More like to help communitiesOften increases stabilityRecent meta-study shows progressWay to reach poor peopleWay to empower womenMany obstacles that decrease potential

benefit¤