Journal of Microfinance / ESR Review


Institutional financial self-sufficiency (IFS) is necessary for a microfinance institution (MFI) to obtain the large amount of funds required to reach and benefit truly large numbers of the poor and poorest households. There is no necessary trade-off between serving large numbers of the poorest households and the attainment of IFS by an MFI, as proven by the case studies in this paper. Cost-effective identification of the poor and the poorest women is essential to maximizing the effectiveness and efficiency of providing microfinance services to them. If the service is not exclusively for the poor and the poorest, it should be operated separately for them to minimize leakage to the nonpoor. The total cost of efficient microcredit to the poor, i.e., the appropriate interest rate, will vary between 35% and 51% of their average loans outstanding, depending on the conditions under which it is provided, and on the quality of the loan portfolio. The poorest women in Asia, Africa, and Latin America are proving that they can and will pay the required cost of this opportunity to reduce their poverty and to provide a better future for their children. This is made possible by the impressive returns to their microenterprises, averaging normally more than 100%.



Journal Title

Journal of Microfinance

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