I compiled some numbers and made a two page introduction to some of the issues in my thesis. Find it in this introduction to my thesis topic.
Small and medium enterprises are commonly targets in development finance. But what about the smalll and medium MFIs?
Fortunately, the global microfinance business gets quite a lot of funds these days. However, the bulk of the finance goes to large and well-tested MFIs, whereas the small and younger MFIs often have problems obtaining finance. The organization FIG (Fonds International de Garantie) has found an innovative way of helping out: It issues bank guarantees for small and medium MFIs. And what’s even better – you can make a direct donation or buy a share. No shareholder has ever lost her investment.
Here I wish to engage in an ongoing debate on defining microfinance. Particpate, anyone who wish! It is easier to follow the discussion if we number our different definitions.
My initial definition is this
(1) Microfinance is financial services targeted towards poor people. Microfinance can be subsidized or unsubsidized.
The advatages of this definition is that it is broad, but at the same time distinguishes microfinance from ordinary financial services.
Currently I am writing on how organizational characteristics can explain difference in microfinance performance. My working hypothesis is that it makes a big difference for the goals and the outcome whether the microfinance institution is an NGO, is public or is a commercial instituion.
Lately, I have been reading and analyzing existing microfinance literature, and I have found that performance in microfinance is explained either by the contract in question or by the managerial practices in use. The former is done mostly by economists: They look at how clients react to different contractual incentive structures and explain outcome from this. The latter is done by human ressource people or practitioners, when giving advice to microfinance institutions.
This creates a knowledge cap in the reserach on institutional setup, which I am trying to fill.
Right now that is how it looks.
DANIDAs in-house journal, Udvikling, made a whole issue on microfinance back in 2005.
Here you can read that DANIDA spent 385 millions on microfinance initiatives in 2005 and that it was in countries like Burkina Faso and Benin where DANIDA does not have a buisiness development sector program.