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Private Sector Microfinance

Private Sector Microfinance
15 pages

Doran, Alan

Publication date
14 Jun 2008

Oxfam International

From Poverty to Power

Discussion paper

Pro-poor microfinance institutions have their origins in NGO-managed not-for-profit programmes. As the microfinance 'industry' has grown and matured, the private sector has become increasingly active in marketing financial products and services to poor people in developing countries, demonstrating that the sector can be commercially sustainable. As well as in-country initiatives to deliver financial services to poor people, microfinance increasingly has an international dimension, such as enabling the transfer of remittances, linking capital markets to microfinance initiatives, and supporting ethical financial consumerism in wealthy countries. The author reviews these trends, and concludes that the expansion of private sector microfinance should broadly be welcomed by anti-poverty campaigners. The entry of commercial actors can result in increased competition, reduced costs, more sustainable services, and greater coverage of financial services for poor people. However, completely commercial services may be unsuitable for the most vulnerable poor, a sub-sector where careful, tailored programming continues to be essential.