How to support community – based financial organizations
One of the main tools to alleviate poverty is creating access to financial services for people who are currently excluded from the financial system. However, it remains a major challenge to successfully create access in these areas on a financially sustainable basis. In many countries, the formal banks are not interested in servicing remote rural areas due to: (i) a lack of economies of scale; (ii) high transaction costs; and (iii) a perception that the poor are not creditworthy. Community-based financial organizations (CBFOs) are often the only institutions available to provide basic financial services to the rural poor, especially in remote areas with inadequate infrastructure.
The purpose of this publication is to provide information on how CBFOs and support structures might best serve remote rural communities, identifying the basic success factors required and the potential challenges to be overcome. It looks at creating effective interventions and the use of key performance indicators (KPIs).