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Thursday, November 20, 2008

Partnerships in microfinance and poverty alleviation

Microfinance is increasingly viewed in Asia and around the world, as an effective and powerful tool for poverty reduction. A range of speakers were invited at the recent CSR Asia Summit to examine the link between expanded access to microfinance services and poverty alleviation. Panellists from the Foundation for Development Cooperation, an international not-for-profit development organisation that has established a pan-Asia microfinance network, Citi Asia Pacific, a global financial institution with extensive philanthropic and commercial involvement in microfinance and ASKI, one of Asia’s most successful microfinance institutions, reflected on why despite considerable growth and innovations in microfinance in recent years, million on poor people in the Asia region still do not have access to basic financial services.

Below are the key highlights of the discussion on how multi-sector partnerships, strategic alliances and other types of collaborations can help strengthen the microfinance industry and overcome some of the barriers to increased outreach and sustainability.

The World Bank estimates 7000 microfinance institutions serve approximately 16 million people in development countries (2005). Although Asia is the most developed continent in the world in terms of volume of microfinance institution activities and active borrowers, microfinance institutions only reach out to 60 million of the nearly 160 million poorest families in Asia. The Foundation for Development Cooperation (FDC), which conducts policy-oriented research, recently looked at the link between microfinance and poverty alleviation. Although the available research is relatively limited, in terms of quality of the data and defining the concept of poverty, many studies have shown that microfinance is less successful in reaching the very poor, destitute, or vulnerable. Studies have shown that when microfinance does reach the very poor or poorest it is not always beneficial. A common finding is that microfinance benefits the moderate poor more than the poorest of the poor. However, there are more positive findings on the strong link between microfinance helping to reduce vulnerability. Risks that create or increase vulnerability include: illness, injury, old age, violence, harvest failure, unemployment, rising food prices, life cycle needs (births, funerals, and marriages), and emergencies (droughts or floods). Finally, much of the available research recognized partnerships as critical to the success of microfinance.

Read in Detail here:

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