Creating Permanent Links between Development and Finance

This paper argues that microfinance will be successful as a development strategy only if it strikes the right balance between the two frameworks that underlie its practice-development and finance.

The paper also argues that for a MFI to reach its financial and development goals, its efforts should intersect at three levels:

• Reaching the poor: The importance of reaching the poor and how ACCION is reaching micro entrepreneurs at the bottom rung of the economic ladder;
• Building institutions: The importance of creating private, sustainable, permanent institutions that specialize in delivering financial services to the poor; also ACCION’s work with affiliate programs to implement innovative strategies that increase their efficiency of operations and address their target markets through new product development;
• Deepening the financial system’s reach, which happens when an MFI becomes a regulated institution that is part of a country’s financial system and also ACCION’s efforts towards this goal in various countries.

The paper concludes that when microfinance follows the above methods, it has the capacity to create structural changes in how capital is made available to people previously excluded from the financial mainstream.