Scaling up Microfinance in Eastern and Western Africa with Lessons from India
This paper compares experiences across Africa with those in India, and identifies the challenges faced by MFIs that may guide public policy in the sector. It provides tentative conclusions based on a qualitative assessment of recent developments in the surveyed countries, supported by background material and studies undertaken by the International Monetary Fund (IMF) and World Bank.
The paper discusses the role of NGOs and the Indian government in the growth of Indian microfinance. It draws on lessons learned from India, based on the experience with self help group (SHG) bank linkage and other microfinance approaches. They include:
- Enabling policy, legal and regulatory framework is critical to scaling-up;
- Equally important is the need to ensure proper targeting of clients;
- Appropriate products, services and good staffing are critical to ensuring effectiveness;
- Inclusiveness and competition in the microfinance sector can generate high payoffs;
- Microfinance should overcome geographic concentration.
The paper recommends that African policy makers should spread microfinance in Africa and bring down the cost of capital and operating costs, thus strengthening the bonding between microfinance and the formal financial system.
