microFinance: A Pathway From Poverty

This paper consists of fourteen summaries that cover research results from a multi country research program on rural finance policies for food security of the poor. Some of the research findings presented are:

• The demand for financial services by the poor: Product innovation that responds to food security motives of rural households can lead to higher reach and higher impact on the poor;
• Current state of development and prospects for microfinance institutions (MFIs): For efficiency in depth of outreach, innovations are still necessary to reach sustainability more rapidly and to expand the provision of sustainable financial services in areas where little progress has been made. These areas are smallholder agriculture, credit for agribusiness, and insurance (such as old age, disability, unemployment, and health);
• Worldwide distribution and performance of MFIs: The IFPRI database of MFIs from 85 developing countries shows 1,478 institutions (688 in Indonesia and 790 in other countries) supported by international organizations. They reach 54 million members, 44 million savers (voluntary and compulsory savings), and around 23 million borrowers;
• Informal markets: What lesson can we learn from them?: The accumulated benefits associated with continued long-term transactions are larger than short-term gains associated with delinquent behavior endowments, not all financial contracts are self-enforcing and adequate steps must be taken to enforce contract compliance. Financial services must be tailored to specific demand patterns.