The role of the state in promoting microfinance institutions
AbstractIn a context of liberalized financial systems, microfinance allows millions of households, usually excluded from classical financial services, to begin or reinforce their own activities and become microentrepreneurs. Yet, in spite of the success of numerous microfinance institutions (MFI), many difficulties remain which must be urgently resolved in view of their ambitious objectives. First, a large number of the rural households still lack access to financial services. Second, most of the existing MFI are not yet financially sustainable. Finally, while funds from governments and donors are rapidly increasing, financial institutions still need solid foundations to avoid management failures. These issues raise questions of the role of the state to promote MFI including (1) which state-owned institutions may be necessary? (2) which level and type of subsidization of the financial institutions can be accepted? (3) what can be the choice for the state between alternative investments in financial institutions or complementary services? (4) what are the necessary conditions for creating a favorable environment? This paper presents the evolution of views on the role of the state in the financial system including theoretical and empirical points of view from the interventionist period of the 1960s and 1970s to the current period of liberalization. Based on country case studies illustrating the divergent role of the state in the development of the rural financial system, the paper reviews the respective role of the state, the NGO and the private commercial banks in increasing their outreach and in adopting microfinance innovations. It also analyzes different issues regarding regulation of MFI.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Food Policy Research Institute (IFPRI) in its series FCND discussion papers with number 89.
Date of creation: 2000
Date of revision:
FCND ; Small business Finance. ; Financial institutions. ; Government. ;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Zeller, Manfred & Schrieder, Gertrud & von Braun, Joachim & Heidhues, Franz, 1997. "Rural finance for food security for the poor," Food policy reviews 4, International Food Policy Research Institute (IFPRI).
- Fatma El-Hamidi & Ragui Assaad & Ahmed Akhter, 2000.
"The Determinants of Employment Status in Egypt,"
269, University of Pittsburgh, Department of Economics, revised Sep 2006.
- Assaad, Ragu & El-Hamidi, Fatma & Ahmed, Akhter U., 2000. "The determinants of employment status in Egypt," FCND briefs 88, International Food Policy Research Institute (IFPRI).
- Assaad, Ragu & El-Hamidi, Fatma & Ahmed, Akhter U., 2000. "The determinants of employment status in Egypt," FCND discussion papers 88, International Food Policy Research Institute (IFPRI).
- Hudon, Marek & Traca, Daniel, 2011.
"On the Efficiency Effects of Subsidies in Microfinance: An Empirical Inquiry,"
Elsevier, vol. 39(6), pages 966-973, June.
- Daniel Traca, 2011. "On the Efficiency Effects of Subsidies in Microfinance: An Empirical Inquiry," ULB Institutional Repository 2013/89989, ULB -- Universite Libre de Bruxelles.
- Marek Hudon & Daniel Traca, 2006. "On the efficiency effects of subsidies in microfinance: an empirical inquiry," Working Papers CEB 06-020.RS, ULB -- Universite Libre de Bruxelles.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.