Critical issues in microbusiness finance and the role of donors . [Version Sept. 1977]

  • In the early 1990s, a consensus emerged among the leading experts in the field of small and micro business finance. It is based on three elements: The focus of projects should be on improving the entire financial sector of a given developing country; a commercial approach should be adopted, which implies covering costs and keeping costs as low as possible; and institutions should be created which are both able and willing to provide good financial services to the target group on a lasting basis. The starting point for this paper, which wholeheartedly endorses these three elements, is the proposition that putting these general principles into practice is much more difficult than some of their proponents seem to believe - and also more difficult than some of them have led donors to believe. The paper discusses the central issues of small and micro business financing in three areas: credit in general and the cost-effectiveness of lending methodologies in particular (Section II); savings in general and the role of deposit-taking in the growth of a target group-oriented financial institution in particular (Section III); and the process of creating viable target group-oriented financial institutions in developing countries (Section IV). We argue that donor institutions must be willing, and prepared, to play a role here which differs in important respects from their conventional role if they really wish to support sustainable financial sector development.

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Author:Reinhard H. SchmidtGND, Claus-Peter Zeitinger
Parent Title (English):Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 6
Series (Serial Number):Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (6)
Publisher:Univ., Fachbereich Wirtschaftswiss.
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:1997
Year of first Publication:1997
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/09/28
Tag:Credit; Development Finance; Institution Building
Issue:Version Sept. 1977
Page Number:31
To appear in: Kimanyi/Wieland/Von Pischke, eds., Financial services and the poor, Avebury (UK) 1998
First: November 1994, Revised Sept. 1997
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht