Is Microfinancing Sufficient?

Access to the financial sector has numerous benefits. Savers and investors are matched, transactions costs are lowered and liquidity is created. But less than half of the households in developing countries have access to financial services, compared to over 70 per cent in the developed world.

By 2006, even in relatively successful countries such as Ghana and Tanzania, only about 6 per cent of the population had access to banking services. In Benin, there were only 35 bank branches serving a population of 7 million. Will microlending increase access to financial services?

Microfinance institutions (MFIs) serve the rural and urban poor, especially disadvantaged women. Often, commercial bank branches are far from towns and villages, and the transport costs needed to access them are unaffordable. The poor may even lack the minimum cash amounts required to open bank accounts. Unfamiliarity with the complex procedures and paperwork involved in withdrawing and depositing money can also constrain access.

Download the one pager from the International Poverty Centre here.

More on this:

Visit: http://www.undp-povertycentre.org/pub/IPCOnePager59.pdf