Microfinance for Poverty Reduction: Building Inclusive Financial Sectors in Asia and the Pacific

This paper discusses the creation of inclusive financial sectors in the Asia-Pacific region that link microfinance with the mainstream financial sector.

The paper maps models of microfinance delivery available in the region, and highlights issues related to outreach and sustainability in the Asia-Pacific region. It discusses approaches to inclusive microfinance, identifies advantages and disadvantages of building inclusive financial sectors and lists potential benefits in the Asia-Pacific context.

The paper reviews experiences of countries in the Asia-pacific region and suggests approaches to poverty reduction through microfinance. Policy recommendations include:

• Reforming lgal and regulatory frameworks to support MFI outreach and sustainability;
• Understanding dynamics between government and private sector in microfinance;
• Establishing supervisory mechanisms by Central banks and finance ministries;
• Enabling flow of capital and access to financial instruments for MFIs;
• Creating apex level loan, equity and capacity-building funds;
• Creating regional donor funds;
• Developing technical and resource networks and agencies in each region;
• Developing regional and national level credit bureaus;
• Involving national governments in International Year of Microcredit (2005) development activities;
• Adopting flexible approaches to sector development.