Microfinance: Building Financial Systems that Serve the Rural Poor

This presentation emphasizes the importance of financial services for the poor. It discusses the following:

• Why are financial services important for the poor?
• Why is sustainable microfinance important for Social Fund (SF)/ Community Driven Development (CDD) projects?
• Why is sustainable microfinance hard to achieve?
• How can SF/CDD projects build sustainable institutions serving the poor?
  • Strategy 1: Banks and/or MFIs reaching down to provide services directly to individuals or groups in low-income communities;
  • Strategy 2: Community savings-based financial organizations linking up to banks so their members can receive additional services.

The presentation states:

• The reasons and circumstances for choosing banks and/or MFIs reaching down approach or community savings-based organizations linking up;
• The pros and cons of 'reaching down' versus 'linking up';
• Some common parameters to keep in mind while choosing any of the two approaches.

The presentation concludes with the following remarks:

• Financial services improve ability of households to manage risks and build economic security;
• Poor people need these services over the long-term;
• Formal financial services are preferable, but community groups can be a viable alternative if savings-based.