Microflnance techniques allow the rural banking needs of poor clientele to be met in cost efficient ways that also contribute to poverty reduction. Micrqfinance offers approaches to resolve information asymmetries in credit decisions, incentives for loan repayments imbedded in low cost supervision, and a focus on savings promotion that provides not only a sustainable pool of loanable funds, but also major benefits for the savers. While these microfinance approaches are powerful, their informal sponsoring organizations have often been characterized by opaque governance arrangements that restrict their ability to be self financing and so limit their future. Utilizing microfinance approaches to reduce the risks and costs of providing financial services to the rural poor within sustainable governance arrangements has been a challenge with mixed results in emerging Asian markets. In response, a growing number of microfinance institutions are gradually evolving into banks so as to provide a basis for their further growth and development.
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