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Finance Against Poverty Volume 2

More than one billion people around the world live in poverty; most of them live in developing countries. The idea that these people might improve their living standards by becoming micro-entrepreneurs – and that financial institutions should support their initiative with small loans – has found many supporters over the last decade.

This book, Finance Against Poverty, examines this theory and reviews the practical results in seven countries. It is published in two volumes:

Volume 1 offers an in-depth analysis of the theory and practice of microfinance, as well as policy recommendations for practitioners in the field.
Volume 2 presents the empirical evidence from seven developing countries: Bangladesh, Bolivia, Indonesia, Kenya, Malawi and Sri Lanka.

Both volumes provide a wealth of information and research on the impacts of savings and credit on productivity, employment, poverty levels and socio-political relations. With its detailed assessment of both the benefits and limitations of financial intervention, Finance Against Poverty is an important text for those studying development, poverty reduction, social welfare and finance.

Volume 2 contains the following case studies:

Metamorphosis from NGO to commercial bank – the case of BancoSol in Bolivia
Indonesia – BKK, KURK and the BRI unit desa institutions
Credit for the poor in Bangladesh – the BRAC rural development programme and the Government Thana resource development and employment programme
Mutual finance and the poor – a study of the Federation of Thrift and Credit Cooperatives (SANASA) in Sri Lanka
India – the regional rural banks
Financing the Jua Kali sector in Kenya – the KREP Juhudi scheme and Kenya Industrial Estates informal sector programme
Rural and agricultural credit in Malawi – a study of the Malawi Mudzi Fund and the Smallholder Agricultural Credit Administration

On the basis of their analysis, the authors conclude:

that market interest rates, intensive loan collection by mobile bankers, savings and insurance facilities and incentives to repay, all had a valuable role to play in most environments, including individual and group-based schemes
that most schemes had positive effects on incomes and poverty and indirect positive effects on other financial providers working with the poor, but little effect on employment and technology
that a trade-off exists between the income impact and poverty impact of schemes; a trade-off which could be moved by improving institutions’ financial performance, lower their transaction costs or remove the demand constraints to which borrowers are subject
that in the light of the above, a case existed for temporary, performance-related subsidies to innovative credit institutions and for such institutions to offer emergency consumption loans