Microfinance needs re-evaluation to achieve financial inclusion

Microfinance Focus, Oct 13, 2010: There is a broad international agreement on the importance of Financial Inclusion as a policy goal for all governments, including the developing countries of Asia. While microfinance is an important tool in achieving financial inclusion, it is increasingly becoming clear that inclusion is much more than providing access to microcredit alone.

What role microfinance can play in achieving financial inclusion was the topic of discussion at the opening panel of Asia Microfinance Forum in Colombo, Sri Lanka today.  Setting the tone of the panel, Mr. Philip Brown, Managing Director and Director of Risk, Citi Microfinance said, “To remain a growth sector the microfinance industry is undergoing another period of re-evaluation with a focus on improved client understanding and product innovation”.

Speaking about the role of microfinance in achieving financial inclusion, Mary Ellen Iskenderian, President and CEO of Women’s World Banking said, “I think MFIs are uniquely placed to play a role in financial inclusion as they can provide a full range of financial services to the poor. Since MFIs are focussing on women, who form the major part of financially excluded communities, microfinance can be instrumental in achieving financial inclusion of a large population”.

Ms. Ellen also delved on the impact of commercialization on the operations of microfinance institutions. Acknowledging the fact that donor money alone cannot meet the huge unmet demand of microfinance and MFIs do need to access commercial capital, she said “Investors must play constructive role in the decision making of microfinance organizations”.

Dolores Torres, President and CEO, CARD MRI, Philippines, who was also on the opening panel introduced the audience to her organization’s training program. “We established CARD MRI development institute where we train our staff. In 2006, we started CARD MRI life insurance agency and in 2007, we got registered as CARD institute bank. We are also helping our members to develop their businesses and marketing.”

Ms. Torres highlighted the uniqueness of CARD bank which has a full equity share holders owned by CARD members. “We also ensure that women participate in every aspect of the management. The total insured individuals are 6 million. For one insured member, her husband and children are also insured, making our contribution a lot higher” she added.

Briefing the audience about the current status of microfinance in Sri Lanka, W M Karunaratne, Assistant Governor of the Central Bank of Sri Lanka said, “In Sri Lanka, law and order has been established for stability. The country has entered into a new era, an era where interest rate has come down to just 5% today. Sri Lanka government has supported the economic growth.

“As far as I know Sri Lanka MFIs are well ahead and in the process to promote microfinance. Self help groups and technology to reach the masses are in place. This will be a new initiative for us to reach more people at low cost” he added.

Stressing on the need of regulated microfinance Mr. Karunaratne said, “In many countries, microfinance main objective is not to make profits but under situations when their funds have dried up, they move towards profit making. Once that happens, it becomes a financial business. At this state, MFIs need be subjected to some sort of regulation. The government of Sri Lanka has taken steps to regulate the MF system”.

The central bank of Sri Lanka reaches to the low income people by promoting linkages between banks and MFIs. It implemented a programme on behalf of the government to reach the under banked areas. “Through microfinance, we hope to promote more income opportunities and reduce income disparities.  Sri Lanka people are ready to learn, they have the capacity to come out of any adversity”.

Related Posts:

• Asia Microfinance Forum 2010 to focus on Financial Inclusion in Asia
• Kalam launches Commonwealth Microfinance Card in Chennai
• Sri Lanka a good place to invest: Amunugama tells microfinance investors
• “Financial Inclusion is fundamental for good Democracy” – Jayanthi Natrajan
• Asia Microfinance Forum 2010 kicks off in Sri Lanka
• Microfinance Focus Poll Results: House believes governments not doing enough
• India reiterates commitment for financial inclusion on Independence Day
• Grameen Foundation helps mobilize $10 million for CARD Microfinance

© 2010, Microfinance News. All rights reserved. 2008-09