Microfinance's Shifting Ideals
Rutherford, S.
Publication Date: 5 Dec 2003
Published by: Asian Development Bank (ADB)
Document Type: Presentation
From charity to financial service delivery
This presentation traces the evolution of microfinance over the last fifty years, and the author identifies the following distinct phases:
- development finance approach of the sixties and seventies,
- microcredit approach of the eighties and nineties, and
- the current financial services approach.
While the development finance approach focused on subsidized credit directed to farmers, the microcredit approached focused on women and micro enterprises. However, the realization that poor need a variety of financial services, in addition to credit, has led to the growing emergence of the financial services approach. The chief characteristics of this approach are:
- targeting poor households (and not women alone),
- offering diverse products such as savings, insurance, pensions and remittance (and not credit alone),
- delivering financial services through alternate structures including groups as well as individuals,
- sourcing funds from commercial lenders and client deposits (and not grants and subsidized loans).
The presentation also cites examples of organizations such as the Grameen Bank of Bangladesh, which have moved towards the financial services approach. The presentation concludes with the assertion that the poor demand financial services as much as others, and hence the case for moving towards the financial services approach is strong.
This presentation was prepared for the conference, "Microfinance in Asia: Poverty Impact and Outreach to the Poor" on December 5, 2003, Tokyo, Japan.
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