Track Record of Financial Institutions in Assisting the Poor in Asia

This paper summarizes the performance of the microfinance industry in Asia and identifies a number of empirical pitfalls and methodological problems. The paper:

• Evaluates key studies and data for the region;
• Uses outreach, sustainability and impact as the conceptual framework of the presentation;
• Uses criteria to define these three objectives and discuss their respective methodological problems.

The paper finds that:

• Outreach is impressive, especially in Bangladesh and Indonesia;
• The expansion of microfinance has helped millions of poor households in the region to receive formal financial services;
• However, financial sustainability is an important problem facing the industry in most countries;
• Many microfinance institutions (MFIs) still depend on government and donor subsidies;
• The impact studies report some positive benefits, but these vary by gender, type of program and country.

The paper lists some unresolved puzzles about impact in the areas of:

• Training;
• Impact on the poorest;
• Dropouts;
• Vulnerability.

The paper concludes by listing implications of the survey for MFIs and policy makers in Asia, examining the areas of:

• Expanding outreach;
• Achieving financial sustainability;
• Improving impact.