ABSTRACT
Microfinance, defined as the provision of small loans on the basis of a group guarantee, mostly to women in the developing world, has experienced rapidly changing fortunes on the international development stage over the past 20 years. The principles underpinning microfinance programmes pre-date the emergence of the intervention in its modern form, and can be traced back to traditional savings and lending mechanisms, including credit unions and various group lending methods known collectively as Rotating Savings and Credit Associations (RoSCAs). Following the success of the Grameen Bank in Bangladesh, microfinance proliferated during the1990s. The number and importance of non-governmental organisations participating in the delivery of development increased rapidly, many of which used microfinance in its various guises to help foster local economic development and support women’s income strategies. These interventions were small scale and based on savings accumulated in the groups or modest amounts of development aid. Certain institutions, most prominently the Grameen Bank in Bangladesh, Banco Sol in Bolivia and Bank Rakyat in Indonesia, scaled up their operations and demonstrated that microfinance, which boasted an enviable repayment rate, could be a financially sustainable, even profitable, development intervention. In 1995, the World Bank set up the Campaign Group to Assist the
and Kate Macleanb
Poorest, and Robinson (2001) published the two-volume text The Microfinance Revolution, in which she recommended that the focus of microfinance interventions should be moved away from poverty alleviation per se towards the development of financially sustainable institutions. The contribution of microfinance would be to lead to the development of formal, reliable financial institutions that could serve the needs of the ‘entrepreneurial poor’.
