Microfinance in Marginal and Upland Areas

This paper takes a look at the relevance and potential of microfinance for the sustainable development of marginal and upland areas in developing countries. It defines what is meant by microfinance and goes on to discuss:

• The impact of the Asian financial crisis, as follows:
  • The banking sector was affected positively by deregulation, and negatively by political interference and lack of supervision;
  • It proved the strength and resilience of rural and microfinance.
• Pre-crisis spill over of growth to marginal and upland areas, stating that to a limited extent, economic growth has enabled governments to finance special rural and microfinance programs in these areas;
• The neglect of marginal and upland areas, as follows:
  • Economic growth has mainly failed to produce sustainable institutions and development in these areas;
  • As a result of the crisis, poverty has been aggravated in these areas.

The paper concludes that:

• Marginal areas require sustainable local financial institutions;
• There is a need for assistance to build physical, institutional and financial infrastructure;
• Infrastructure can be built on existing institutional knowledge, which is based on self-reliance;
• Local institutions, together with non-government organizations (NGOs) and government agencies, can bring systematic development in marginal and upland areas.

The paper recommends:

• Adjustment of different microfinance development approaches to the local context;
• Strengthening of local initiatives;
• Dissemination of financial information;
• Promotion of linkages to national support structures.