Functional and Structural Complementarities of Banks and Microbanks in L.D.Cs

This paper explains the concept of monetary payments as a foundation of an analytical construction of the functional complementarity of microfinance institutions (micro banks) and official banks (banks) in less developing countries (L.D.Cs).The paper examines two main questions:

• How can we interpret the function of microfinance institutions (MFIs) beyond the simple role of financial intermediaries?
• What are the consequences of this new interpretation on the monetary and financial systems analysis in L.D.Cs?

The paper:

• Provides feedback on the basic analysis of complementarity between MFIs and official banks from a structural point of view;
• Explains the concept of payment and its links with money issue process as a foundation of MFI monetary function analysis;
• Proves analytically the monetary function of MFI in L.D.Cs.

The paper states that:

• In L.D.Cs., part of the non-spent generated income is preserved in the form of deposits accounts near micro banks and banks;
• The share preserved near micro banks, when it is not used to finance consumer expenditure and income generating activities, is often invested in a portfolio of deposit accounts near banks;
• Micro banks are structurally complementary to banks. They are a "super deposits accounts de facto" for households which do not have access to banks' financial services;
• Taking into account their role in micro firms' production cost funding, micro banks cause monetary income generation;
• Thus they are "banks de facto" and are functionally complementary to banks in L.D.Cs.