Reversing the Coin: What International Financial Institutions Do to Change the Face of Microfinance

Paper
Date Published: 
May 2007

IFIs provide their perspective on the debate over IFI roles in microfinance investment

This paper focuses on the role of international financial institutions (IFIs) in a changing microfinance environment and in closing the gap between supply and demand.The paper states that:

  • The current microfinance landscape is diverse and dynamic,
  • IFIs are responding to this dynamic environment by:
    • Strengthening and tapping the local financial sector and deposits,
    • Applying innovative refinancing instruments,
  • IFI approaches both a strengthening, as well as a financing focus on MFIs and on financial sector development,
  • IFIs act as market enablers, where microfinance sectors are still underdeveloped and immature,
  • IFIs:
    • Tap local markets,
    • Mobilize funding through innovative instruments,
    • Create and strengthen microfinance institutions (MFIs),
    • Foster stability in a volatile environment,
  • IFIs have been very active in developing and supporting financing structures that are designed to crowd in new investors.

The paper concludes that:

  • Microfinance is ready to be integrated into the financial sector,
  • MFIs need to become sound financial institutions guided by their missions but with clear status, ownership and governance structures to form an integral part of a financial system and to tap local and international funding,
  • IFIs have played and continue to play a prominent role in microfinance development,
  • The role of IFIs is broad and not limited to funding,
  • There is still ample demand for the role of IFIs, which are fully complementary to growing private investments.
Type: 
Paper