Commercial Microfinance: The Right Choice for Everyone?

This paper is a study of commercial microfinance in the Asian region where:

• Microfinance services are provided by commercial organizations that are part of the formal financial system:
  • Banks;
  • Credit unions;
  • Specialized banks;
  • A range of nonblank financial institutions.
• The organizations are financed by commercial capital.

The report analyzes the pre- and post-transformation performance of microfinance institutions (MFIs) in the region and presents the following:

• Most of micro credit NGOs have not left their original market behind;
• The initial innovators of a commercial approach to microfinance are some of the best performing MFIs in the world today;
• The three groups of market players are the adopters, the fence sitters and the rejecters:
  • The Rejecters can contribute to a body of knowledge by regular reporting on meaningful performance indicators in:
    • Tackling poverty;
    • Building inclusive financial markets.
  • The Fence-Sitters can play a critical role in working with support organizations to:
    • Develop capacity;
    • Engage banking authorities.
  • The Early Adopters continue to innovate with technology and will seek ways to:
    • Expand institutional capacity;
    • Attract private commercial capital.

The paper concludes that as important players in the marketplace, each group has a role to play in bridging the gap between supply and demand for microfinance.