Partnerships in Microfinance: A Discussion Primer
This paper explores the phenomenon of linkages and partnerships between organizations that have increased the scale, outreach and diversity of financial services offered to the poor. The paper examines the implications, pitfalls and constraints of these linkages for the service providers and the clients, and provides suggestions on how to manage them. The paper identifies three trends in the maturing microfinance industry:
- Greater integration of informal financial service providers into the formal financial sector,
- Greater consolidation of retail service providers,
- Greater specialization of institutions within the sector, providing a wider range of financial and support services.
It states that:
- Partnerships bring together complementary resources and skills to solve problems that one party could not address by itself, such as (in microfinance):
- Rapid expansion in outreach to remote areas,
- Maximizing the impact of services on economic development, poverty reduction, etc.
- Microfinance institutions (MFIs) are increasingly entering into partnerships to address core issues of expansion, including sourcing capital and diversifying financial services.
The paper identifies the following challenges to the rapid scaling up of partnership approaches in microfinance:
- Lack of active leadership,
- Lack of commitment to build the capacity of organizations.
It concludes with a mention of the partnership between 'Banking With the Poor' (BWTP) network, and the Citigroup Foundation, that have initiated a capacity building program in Asia to build the capacity of banks, MFIs and other organizations to explore opportunities for, build and maintain mutual beneficial partnerships.
