Microfinance as a Tool for Development

This paper explores the role of microfinance in stimulating development. It examines the role of microenterprise in development, studies existing microfinance models and provides a future outlook for the sector.

The paper examines the concept and definitions of development and discusses different approaches to achieving development. It states that though the poor have entrepreneurial energy, they are constrained by lack of resources and barriers to borrowing. It presents examples of how microfinance has enabled the poor to start enterprises and improve their lives. While microfinance is a powerful force in aiding development, current models have many limitations. These include:

• Focus on institutional sustainability that may limit outreach;
• Issue of balancing breadth and depth of outreach;
• Gender issues and problems faced by women;
• Lack of focus on environment, health and safety,
• Lack of training for entrepreneurs.

The paper states that international agencies have recognized the importance of credit in development and are keen to support the microfinance model.