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

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.