Commercial Microfinance in South Asia: Bangladesh, India, Nepal, Pakistan and Sri Lanka

This paper examines developments in microfinance in South Asia, the current state and prospects for commercial microfinance, the growing role of "apex organizations" to fund microfinance institutions (MFIs), and their implications for commercial investors.

The paper comments on:

• The international attention that the earthquake and the tsunami have brought on South Asia;
• The key role that MFIs can play in the long-term economic recovery of the affected people;
• The vast gap between the demand for and supply of financial services for the poor;
• The success of the Grameen Bank of Bangladesh and its 'peer group' lending model;
• MFI expansion in South Asia with government and non-government organization (NGO) support;
• The recent trend towards commercialization of microfinance in South Asia, especially in India.

The paper concludes that:

• Commercial interest in microfinance is growing in South Asia;
• However, the full benefits of a commercial approach are further from reality than in other regions;
• This is partly due to the subsidized microcredit programs promoted by the region's governments and some donors;
• Also, commercial microfinance funds and MFIs have been unable to tap the huge potential for micro-lending in India.

Finally, the paper states that South Asian governments and MFIs can look to the success of commercial microfinance in places like Latin America, Indonesia and the Philippines for evidence that commercial microfinance and helping the poor can go together quite well.