Microfinance Strategies: Strategies for Developing Viable Microfinance Institutions and sustainable Microfinancial Services in Asia

This paper presents three approaches to make full range of financial services available to all segments of the population. These approaches highlight: Regulatory reform approach improves the policy environment of microfinance. It mainly comprises:

• Interest rate deregulation;
• A revised banking law to facilitate the establishment of local financial institutions;
• Effective supervision over local institutions by an appropriate regulatory authority.

Institutional transformation approach improves the financial infrastructure, such as:

• Adapting banks to the needs of the microeconomy;
• Upgrading non formal financial institutions to local banks;
• Linking formal and non formal financial institutions;
• Establishing new microfinance institutions.

Sound practices approach improves the effectiveness of microfinancial services, by:

• The mobilization of internal resources for institutional self-reliance;
• The promotion of various kinds of microsavings as a source of microenterprise self-financing;
• Appropriate microcredit products with small loan sizes growing according to repayment performance and absorptive capacity;
• Microinsurance products contributing to loan security;
• Tying credit to savings and insurance to enhance financial discipline and bankability;
• Combining savings and loan instalment collection or financial and commodity transactions;
• Customer-oriented microfinance procedures and services set by financial institutions rather than government;
• Adequate risk management, timely repayment collection, monitoring and effective information gathering.

[Author's abstract]