Partnership Approach in Microfinance

This paper discusses the partnership approach and its significance in the microfinance industry.

The paper states that:

• As the microfinance industry matures and becomes integrated within the formal financial sector, it will become increasingly important for institutions to strengthen their existing alliances and to form new ones;
• The partnership approach brings together complementary resources from diverse organizations to address complex development problems;
• There are two such problem areas in microfinance, namely the need to:
  • Rapidly broaden outreach of rural financial services in a sustainable way (supply);
  • Maximize the impact of these services on economic development, poverty reduction and the improvement of people's lives (demand).
• It is important for partnership approaches to bridge the gap between microfinance demand and supply.

The paper concludes that:

• Partnerships are not a panacea;
• They are not appropriate in all circumstances, carry significant risks, are rarely easy, and can take time and resources to establish and maintain;
• However, when implemented well, the resulting win-win solutions can have profound effects;
• Commercially-driven partnerships in microfinance are driven primarily by the market;
• Rapid scaling up of partnership approaches in microfinance is unlikely to occur without active leadership by organizations and individuals in a position to facilitate the process;
• A commitment is needed to build the capacity of organizations, especially of small MFIs, to actively broker and enter into partnerships on an equitable basis.