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Microfinance in LDCs: multipurpose NGOs linkage models

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  • Chiara SANSEVERINO

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Abstract

The paper gives a theoretical framework of microfinance and it analyzes Non Governmental Organizations (NGOs) as Microfinance Institutions (MFIs). Multipurpose NGOs in LDCs were the leading part in the so called ‘microfinance revolution’. Nevertheless a ri-definition of their role is needed, given some critical impacts of NGO programs in microfinance and given the rise of new and more specialized providers. The hypotesis is that the new role can be pursuit through the promotion of strategic partnerships in which the multipurpose NGO, as promoter, manage the component of non-financial services and other functions which differ from financial service delivering itself, such as groups capacity building and designing loan schemes guarantee. This kind of ‘linkage model’ can overwork NGO ability to stay at the grassroots and succeeds in both reducing asymmetric information phenomena and administrative costs for the Financial Institutions. By doing so it channels new clients’ demand to formal financial system supply. This intermediation action will be highlighted through the analysis of four interesting cases in very different LDCs: Zimbabwe, Bosnia, Bolivia and India. The paper aims at showing some experiences which can contribute to deepen knowledge and improve microfinance good practises among operators

Suggested Citation

  • Chiara SANSEVERINO, 2007. "Microfinance in LDCs: multipurpose NGOs linkage models," Departmental Working Papers 2007-09, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  • Handle: RePEc:mil:wpdepa:2007-09
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    File URL: http://wp.demm.unimi.it/files/wp/2007/DEMM-2007_009wp.pdf
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    Keywords

    MFIs; NGOs; financial markets; formal and informal sectors; international linkages to development;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • N2 - Economic History - - Financial Markets and Institutions
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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