ABSTRACT
Efforts to expand the ‘frontier of formal finance’ to reach the poor have given rise to an eclectic set of institutions, organizations and programs during the last decade or so. This chapter presents a brief overview of the issues that are most relevant when considering alternatives to informal finance, and a summary of the key features of informal financial transactions and institutions. It reviews a number of observed regularities in the development of relatively successful ‘alternative’ institutions, to conclude with an assessment of what these institutions have accomplished in diversifying the supply of financial products to the poor, and serving specific market segments. The potential market niches may be even wider for savings mobilization among the poor than they are for loan services. The chapter concludes that innovative institutions currently recognized as successful have indeed created market niches, complementing rather than substituting for informal financial arrangements.
