Microfinance in LDCs: Multipurpose NGOs Linkage Models
48 Pages Posted: 19 Apr 2007
Date Written: February 2007
The paper gives a theoretical framework of microfinance and it analyzes Non Governmental Organizations (NGOs) as Microfinance Institutions (MFIs). Multipurpose NGOs in LDCs were the leading part in the so called 'microfinance revolution'. Nevertheless a ri-definition of their role is needed, given some critical impacts of NGO programs in microfinance and given the rise of new and more specialized providers.
The hypotesis is that the new role can be pursuit through the promotion of strategic partnerships in which the multipurpose NGO, as promoter, manage the component of non-financial services and other functions which differ from financial service delivering itself, such as groups capacity building and designing loan schemes guarantee. This kind of 'linkage model' can overwork NGO ability to stay at the grassroots and succeeds in both reducing asymmetric information phenomena and administrative costs for the Financial Institutions. By doing so it channels new clients' demand to formal financial system supply.
This intermediation action will be highlighted through the analysis of four interesting cases in very different LDCs: Zimbabwe, Bosnia, Bolivia and India.
The paper aims at showing some experiences which can contribute to deepen knowledge and improve microfinance good practises among operators.
Keywords: MFIs, NGOs, financial markets, formal and informal sectors, international linkages to development
JEL Classification: G21, L31, N2, O17, O19
Suggested Citation: Suggested Citation