Case Studies in Microfinance: Discussion/Technical Paper - NGOs in Microfinance: Past, Present, and Future - An Essay

This paper is based on research conducted by the World Bank under the sustainable banking with the poor (SBP) project.

It suggests:

• With a few notable exceptions, the record of NGOs in microfinance is a poor one;
• There is little evidence of any aggregate impact on poverty reduction as the result of NGO microfinance efforts;
• NGOs have difficulty in coming to terms with both sustainability and outreach;
• NGOs may be making a strategic error in focusing on microfinance;
• NGOs have not learned as well as they might from the lessons of development history.

It concludes that:

• Microfinance is a young field and that limited results or even failure are to be expected especially from organisations with little experience.

With regards to the argument that many NGOs and their donors have put too much hope on credit alone as a key to poverty reduction, most of them know that credit alone is not enough due to the grassroots orientation of NGOs and because they are (in theory at least) less bureaucratic than large development assistance organisations, they are capable of overcoming a subtle but important barrier to successful facilitation which is the "packaging" of knowledge and skills.

[Adapted from the author's abstract]