Publication: Financial Sector Policy and the Poor : Selected Findings and Issues
Date
2004-09
ISSN
Published
2004-09
Author(s)
Honohan, Patrick
Abstract
This paper presents new empirical
evidence on how financial sector policy can help the poor.
It is often thought that promotion of specialized
microfinance institutions is the best or only way forward.
However, a strong mainstream financial system is also
pro-poor-perhaps even more so: while mainstream financial
depth is measurably associated with lower poverty, for
microfinance this is not yet so. The roles played by
microfinance and mainstream finance in tackling poverty
should be regarded as complementary and overlapping rather
than as competing alternatives. The essential similarities
between the two will become more evident as individual
microfinance firms, or associations of firms, grow to the
scale needed for sustainability. Policy design that
recognizes the need for larger and stronger microfinance
institutions poses no threat to the health of mainstream
finance. Such a policy would not impose low interest rate
ceilings; nevertheless, the goal of protecting the
vulnerable from credit market abuses and prejudice should
not be neglected in an effective package of policies
favorable to the growth of both micro and mainstream finance.
Link to Data Set
Citation
“Honohan, Patrick. 2004. Financial Sector Policy and the Poor : Selected Findings and Issues. World Bank Working Paper;No. 43. © Washington, DC: World Bank. http://hdl.handle.net/10986/14874 License: CC BY 3.0 IGO.”
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