A Review of the Economic and Social Impact of Microfinance: With Analysis of Options for the Mediterranean Region

This study examines microfinance’s economic and social impact in the Mediterranean region.

Microcredit is the predominant microfinance offering in the Mediterranean region. The study reveals that:

• Clients do not have access to microsavings, insurance and money transfer systems;
• MFIs are constrained by banking sector regulations;
• Microfinance has resulted in improvements in household income and enterprise profits and revenue;
• Impact on employment is weak, with most microenterprises remaining one-man businesses;
• Microfinance has helped enterprises increase productivity, and improve relationships with suppliers;
• Credit is typically used for working capital, and lending for capital formation is less common;
• Impact on household savings is difficult to identify as boundaries between the household and the enterprise are often indistinct;
• Microfinance clients are positive about microfinance impact on living conditions.

Microfinance in the region would benefit by the expansion of microsavings, provision of money-transfer and microinsurance, and regulatory reform that would allow MFIs to accept deposits and provide other non-credit services.