ABSTRACT
The development of the microfinance sector is based on the assumption that the poor possess the capacity to implement income-generating economic activities but are limited by lack of access to and inadequate provision of savings, credit and insurance facilities. The financial diaries prepared by poor households in urban and rural areas in Bangladesh and in India reveal that the respondents patch together a wide array of informal financial arrangements with semi-formal and formal services. Credit can be provided in different forms and varied institutional arrangements such as standard loan or through different informal channels. The Consultative Group to Assist the Poorest has assessed the relative emphasis that existing MFIs place on identifying and reaching the poor, attracting the poor and discouraging or excluding the non-poor. Diverse and flexible financial services can provide positive incentives to attract the poorest and reduce the likelihood of their exclusion.
