Microfinance Industry: Sustainability, Outreach and Impact

Abstract

 

Microfinance has been seen as a key tool for poverty alleviation in least developed countries (LDCs). Target groups of microfinance are very poor people who have no access to any financial resources and need loans. Credits help the poor in running their small businesses or in a creation of its own job opportunities. The loans are often embezzlemented, are not financial sustainable in the long term, and are frequently critised. The question is if microfinace is real universal cure and which influence has got on elimination poverty and social even economical effect. It also considers a perspective of model preferences focused on business (conditional high interests, possibility to contact intermediaters, gaining easier access into external finacial sources) or a charity that is resistant to crisis thanks to using internal financial sources. Microfinancial sector in least developed countries consists of microfinancial institutions (MFIs), microfinance products and the programs that cause poverty alleviation using an appropriate tools. Are microloans medicine or not? Is this sector indispensable for the elimination of the poverty? The results are evident in a triangle of finance that might be in a synergy of these components: financial sustainability, welfare impact (direct/indirect) and outreach (breadth and depth). This article is structured in four sections, each of them is analyzing its background, positions and limits across the microfinancial sector. Our research is based on findings of author's observations, but also on the institutions reports, an analysis and adequate literature.

Keywords: Microfinance, Microfinancial Industry, Microfinance Institutions, Microfinance Triangle, Poverty, Sustainability, Outreach, Impact.