Conclusions

Credit is scarce and capital does not flow naturally from the rich to the poor. The poor have low access to bank credit because of the lack of collateral and because traditional financial institutions find it costly to deal with small credit transactions. Microfinance largely facilitates the poor’s access to institutional credit and has both economic and noneconomic impacts including poverty alleviation, women empowerment, and promotion of gender equality. However, microfinance is not a panacea for poverty alleviation and credit remains inaccessible to certain sectors of society especially the poorest of the poor. To benefit greater segments of society, microfinance should be part of a broader strategy that combines it with other social protection programs.