Microfinance -The users -Benefit -Organizations - Profitability and reaching the poor, a trade off? -Why high interest rate? -When doesn´t microfinance work? -The role of regulation and supervision -Governments role

Why microfinance? Poor people need diverese financial services Poor people lack access to formal financial services Informal services, private moneylenders Savings clubs, in items, savings associations Formal banks have a tradition of not serving the poor

Microfinance is; Basic financial services Loans Savings Money transfer services microinsurance

Poor people use it for; Run their businesses Build assets Smooth consumtion Manage risk

Interest rates Average; about 28% To onlend small amounts to many recipients is more expencive than providing large sums to few recipients Number of employees Product design National financial situation

Who are the MF users? Vulnerable noon-poor Upper poor Poor Very poor

Upper poor Financial active poor People that allready have some sort of income Microentrepreneurs

Moore about the MF users; Women are a majority 33% men Some organizaions only women Operating small business Some are entrepreneurs by will others by necessity

What differens does it make?

What difference does it make? We dont´know!

Is microfinance a good tool? So far no study support the theory of upliftment of poor people by; Improving income Growing capacity of small scale businesses

What is microfinance doing? Income smothening Important for the poorest Cash management on household levels Cost-effective aid

Poor people like MF Numbers of MFI increasing every year MFIs don’t have to advertice High repayment rates People return for more services

Poor people say They like microfinance They trust MFIs in general They find the services to suitable for their needs

Who are the organizations? NGOs Commercial banks Cooperatives Government-owned organizations Profit making Non-profit making

Governement Cgap earlier message; governments should create good national structures for microfinance, not provide microfinance services themselves Today the ”tone” is less strict on this issue. This is due to the fact that there are governements globaly that are MF providers

The role of the government Pormoting financial access Protecting customars Providing financial services directly

Profitability and outreach Microfinance history 1960; subsidized credit to farmers 1970; Grameen Bank credit to women 1990; CGAP commercial finance 2000; commericial approach with doubdts

Poverty lending Poor people lack access to formal Financial services Subsidized loans instead of ordinary aid grants Empowerment Livelihood Gendered poverty Grassroot

Commercial microfinance Microfinance revolution Increasing number of organization and users Many poor still lack access to financial services Povery lending: limited expansion, aid dependence, less protection of poor people and their money

The bus and the passengers Much focus has been on the bus A need to bring in the passengers, the road and the destination Women are good for MF organizations... High interest rates ”A school with no toilet...”

commercialisation Outreach! Goal: to cover the cost Interest rates has to be set according to this The organization need a certain amount of users Repayment rates has to be keept high It is easier to cover costs if the users are ”not so poor”

Too poor for MF? It is expensive to be poor Poor people still have costs to cover Poor people do find ways to cover their financial needs Again; poor peoples alternatives are expensive Still, if lack of shelter, food and cloths, credit might not be the answer

Microfinance today Profit minded commercial actors Non-profit actors and social investors Commersial microfinance New technique Regulation

How many, how much? Hard to estimate Few are keeping reccords 80% (of 4.5 billion) lack access to formal financial insitutions

How many, how much? 2007, 154,8 million microfinance users Microfinance providers: 3,350 Increasing by 30% and year

Microfinance is complicated It tries to combine poverty reduction with market oriented thinking What is good for the organisation and the development of financial systems does not necessary corrolate

Focus: outreach The general aim is to provide MF to people that are excluded from financial services Focus is on the services they might need Especially credit But the effects in macro levels as well as micro levels is unclear Microfinance in history, the Swedish case

Creating financial services to the poor First savings bank 1820 Lower the cost of the increasing number of poor in the cities Registered as ”self help organisations” Non-profit, reinvestments in local society Important providers of credit to entrepreneurs Inside lending as logic

litterature M. Robinson ”The Microfinance Revolution” M. Yunus ”De fattigas Bankir” Hospe and Lontz ”Livelihood and Microfinance” D. Collins et al. Portfolios of the Poor M. Harper ”What is wrong whit Microfinance?”