Paper
From Recipients of Reparation Payments to Shareholders of Microfinance Institutions: A Study of the Possible Relations between Reparations for Victims of Human Rights Abuses and Microfinance
Can MFIs provide the necessary institutional framework for a sustainable impact on such recipients?
This paper argues that institution building is the only method by which victims of civil rights abuses can be allocated reparation benefits on a sustainable basis.
It identifies three ways in which microfinance institutions (MFIs) can provide the institutional framework for sustainable impact - by offering:
- A secure place for the accumulation of savings;
- Credit for investments and working capital to small and micro entrepreneurs;
- The recipients of reparation the opportunity of rehabilitating or constructing MFIs.
The paper argues that:
- Financial relations between MFIs and their customers should be based on commercial principles;
- For sustainable impact, the following conditions must be met:
- Investment of payments in income-generating opportunities,
- Access to deposit-facilities and credit,
- The repayment of loans on time.
- Non-government organizations (NGOs) need to be upgraded to formal financial institutions;
- Support should be given to locally owned financial institutions that may be co-owned by recipients of reparation payments in the following ways:
- Upgrading informal financial institutions,
- Establishing new ones,
- Linking formal and informal finance.
The paper presents examples that demonstrate each of these strategies. It concludes by discussing the role of NGOs as promoters of good practices.
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