Commercial Banks and Microfinance
The term “microfinance” (MF) refers to the provision of banking services to lower-income people, especially the poor. In the history of MF, microfinance institutions (MFIs)1 have been the first to identify the large unserved demand for microcredit in developing countries, develop methodologies for delivering and recovering small loans, and begin credit programs for the poor. Given their nature, though, MFIs can normally meet only a fraction of the demand for microloans in their service areas. Commercial banks have begun to see MF as a potentially profitable business and are starting to venture into this field. This approach to MF (known as “downscaling") is different from that of “upgrading” or transforming MFIs into regulated institutions. Evidence is currently showing that financial institutions can profitably attend MF needs on a massive scale. This paper aims at exploring the main aspects and future outlook in connection with commercial banks provision of MF services. A review is made of the incentives and disincentives for financial institutions to venture into the MF sector, and their specific advantages and disadvantages when competing in this market. A classification of the main operating models currently adopted by banks for entering the MF market is established as well as an analysis of the local regulations that could potentially apply to each of these models.
|Date of creation:||Jun 2007|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
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.:
- Ravicz, R. Marisol, 1998. "Searching for sustainable microfinance : a review of five Indonesian initiatives," Policy Research Working Paper Series 1878, The World Bank.
- Delfiner, Miguel & Pailhé, Cristina & Perón, Silvana, 2006. "Microfinanzas: Un análisis de experiencias y alternativas de regulacion," MPRA Paper 497, University Library of Munich, Germany, revised 02 Apr 2006.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:10229. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.