Paper

Microfinance in South Asia: Toward Financial Inclusion for the Poor

Analyzing the growth of microfinance in South Asia

This paper examines the origins of microfinance in South Asia. It discusses the current state of microfinance in Bangladesh, India, Sri Lanka, Afghanistan, Pakistan and Nepal.

The modern microfinance movement in South Asia was born in Bangladesh in the 1970s as a response to the poverty of its rural population. Key characteristics of microfinance in South Asia include:

  • Rapid growth and extensive outreach to poor people in rural areas;
  • Focus on women as economic agents;
  • Development of specific legal frameworks to facilitate growth;
  • Varied institutional structures such as Grameen model, self-help groups, cooperative programs, mixed model and rural support programs;
  • High levels of donor financing;
  • Provision of diverse products such as credit, savings services, microinsurance, remittances and microleasing;
  • Large sustainable MFIs that have a concentration of most microfinance clients in each country;
  • Problems of ineffective management and control systems, poor recovery performance and political manipulation;
  • Focus on both financial sustainability and social performance.

The paper predicts the future growth of microfinance in South Asia through large, profitable, specialized institutions that will provide a range of diversified and flexible products and reach out to even poorer people.

About this Publication

By Sinha, S., Rasmussen, S. et al
Published