Microfinance

Microfinance has now established itself as a proven international tool to fight against banking exclusion and, consequently, fight against poverty and social exclusion by contributing to the development of the local economic base, as well as to job and income creation…
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Promoting responsible microfinance

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Promoting responsible microfinance

In developing countries and a number of emerging countries, a majority of the population does not have access to “traditional” banking services. In Sub-Saharan Africa, less than one adult in five has a bank account and just over one in four in the Latin America-Caribbean and East Asia-Pacific regions. This is due to the fact that incomes and credit needs are too low compared to the profitability thresholds defined by banks.

Since microfinance was created in the 1970s, it has demonstrated that financial services tailored to the poorest are not only useful and necessary, but that they can also be profitable.

They allow people who are excluded from the banking sector – particularly small rural producers and workers in the informal sector, first and foremost women – to access financial services tailored to their needs (microcredit, micro-insurance, savings, means of payment…) in order to develop their activity, secure their income and face the hazards of life (illness, death…).

Proparco's role

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Proparco's role

Proparco works to support the emergence and development of strong and responsible actors: MFIs, banks, and funds investing in the microfinance sector. By allocating loans, particularly in local currency, or through equity investments, Proparco contributes to increasing local financing capacities, as well as to the financial soundness and stability of actors in the sector.

Prior to any financing, Proparco pays very close attention to the strategy of MFIs in terms of profitability: no financing is allocated to institutions that generate significant profits to the detriment of their clients.

Proparco’s operations aim to promote responsible microfinance. To this end, PROPARCO advises and supports its partners on questions of governance and financial security, environmental and social issues, as well as for the implementation of measures to protect their clients, particularly against overindebtedness.

Over 2 million
people will have access to microcredits with the €192 M of allocated funds

Microfinance has gradually been structured, regulated and the range of actors extended in order to meet increasing demand (over 90 million clients around the world in 2012).

Commercial banks have developed specific products alongside NGOs, which have led the activity for a long time. Similarly, investment vehicles have been set up to facilitate the mobilization of the capital required to develop the activity of microfinance institutions (MFIs), while ensuring a certain level of return for investors.

Microfinance is today an essential component of the financial system in Southern countries, but it still needs to face a number of challenges: the first is to continue to be a tool for development and financial inclusion for populations, by maintaining the balance between its social mission and its economic viability.

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Cambodia

MICROCREDIT: A SOLUTION under certain conditions

By offering financial services to the neediest population groups, microfinance institutions support micro-enterprises and help enhance living conditions for their customers. Microfinance provides assistance in starting up a business, mobilizing savings or taking out insurance to cope with the hazards of life. This meants it has a potential for growth that is commensurate with the degree of financial exclusion that continues to plague so many developing countries. At first blush, this looks like a ideal way out of poverty.
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