Is microfinance the right tool to unlock the potential of the poor in Africa?

This paper presents the trends in African Microfinance movement and the future course of action. The paper recommends:

• Classifying MFIs by objectives to understand the trends.
  
• Offering more diversified services and addressing diverse segments.
  
• Realigning the roles of major actors to achieve the task of moving from a focus on “outreach” to “sustainability”.
  

Based on the new orientations aiming at enhancing access to the financial services, the author streamlines interventions at three levels - macro, meso and micro, and recommends the following interventions at various levels:

Macro level:

• Development of regulatory and supervision framework,
• Credit policies for more conducive environment and lesser government involvement,
• Integration of microfinance into mainstream financial market,
• Land reforms and property rights,
• Markets liberalization and sector’s analysis.
  

Meso level:

• Partnership between banks and MFIs,
• Capacity building and institutional strengthening,
• Guarantee schemes,
• Credit bureaux,
• Capacity building and institutional strengthening.

Micro level:

• Management best practice for increasing productivity,
• Information technology,
• Guarantee schemes to back up micro borrowing,
• Strategic management, business planning and capital restructuring,
• Product innovations,
• Reporting and auditing for transparency.

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