Globalization of Microfinance Markets: An Overview and Some Conditions for Success

This paper reviews a number of interconnected issues that can contribute to a successful transition of microfinance from local to global level.

The paper states that the successful transition to global microfinance markets must pass through rigorous filters. Players must share lessons learnt on how microfinance works and how global financial markets operate. Governments should establish the rules of the game for the new business along with an adequate institutional and policy framework. The paper further states that microfinance globalization is a process of:

• Accession to global funding sources with the aim of scaling up microfinance services, while strictly adhering to microfinance best practices;
• Permeation by which the new microfinance culture pervades conventional financial and banking environment and thinking on small borrowers, within a development environment and a new business eco-system.

Finally, the integration of financial markets can reduce market failures and give microlenders and borrowers access to more funding sources, increasing outreach and sustainability of microfinance institutions.