Microfinance and the Poor in Central Asia - Challenges and Opportunities

This document is a study that describes the current status of the microfinance system in Central Asia, and identifies practical and reality-based operational interventions to support the expansion of services. The study:

• Characterizes the microfinance industry in general, and the state of microfinance in Central Asia;
• Presents an overview of the microfinance sector in each Central Asian country;
• Describes the main types of institutions and active donors in the region, focusing particularly NGO MFIs;
• Analyzes current constraints to the expansion of this industry;
• Recommends short-term and long-term actions for improving the sustainability and performance of MFIs.

The report details the critical challenges facing the MFIs:

• Low current outreach of existing MFIs;
• Limited penetration of microfinance services in rural areas;
• Insufficient sources of funds;
• Uncertainty about the legal status, tax requirements, and other regulatory implications;
• Low sustainability due to high costs, high risks, and limited risk mitigating ability.

The study makes the following recommendations for the future:

• Additional donor support is necessary to solidify past achievements and move forward towards developing a more sustainable and diversified microfinance sector;
• Several fundamental problems must be addressed for microfinance to fulfill its potential of helping the poor and contributing to overall economic development in Central Asia;
• Much more could, and should, be done to expand microfinance services to the poor.