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Code: ASS – 008 Author: Richard L.Meyer Quantity: 1 Type: copy Status: 1/1
Introduction
Major investments have been made in developing microfinance in Asia with reducing poverty as one of the frequently stated objectives for these programs. The purpose of this paper is to summarize evidence about how well the microfinance industry in Asia is performing towards meeting this objective.
A general assessment of microfinance is complicated by the variety of institutional forms found in the region and the different objectives pursued by financial institutions. For example, the unit desa system of Bank Rakyat in Indonesia (BRI-UD) was designed to deliver market-oriented financial products to individuals with a heavy emphasis on mobilizing local savings. The Grameen Bank (GB) and most microfinance institutions (MFIs) in Bangladesh are designed to deliver subsidized loan through joint liability groups. Until recently, obligatory savings were treated largely as a source of loan capital rather than a useful financial service to clients. While the BRI and many MFIs use branch systems to deliver products directly to clients, others employ a village banking or credit union approach to build small independent member-owned financial institutions to serve local clients. Some countries have created specialized banks for the poor that offer a wide variety of banking services. Others countries are creating self-help groups links to banks, and there are a few cases of commercial banks opening special windows to serve the poor. Therefore, it is difficult to generalize about the entire industry and there are no comprehensive date covering the thousands of MFIs that operate in the region. For these reasons, the information presented here is derived from studies conducted on individual institutions and the few countries that provide comprehensive data.
In the next section of the paper, the criteria used to measure performance will be discussed. A section follows that summarizes key studies with evidence on performance, and the last section identifies issues faced by MFIs and policy makers to improve microfinance performance in the region.
