Microfinance in South Asia

Abstract

In South Asia, the modern microfinance movement was born in Bangladesh in the 1970s as a response to the prevailing poverty conditions among its vast rural population. Astonishing growth rates in Bangladesh, particularly during 1990s, created a new dimension for microfinance worldwide as microfinance institutions grew to include millions of clients. The start of the twenty-first century reinforced this trend as the Bangladesh numbers continued to grow impressively; in India, a substantial microfinance system based on Self-Help Groups (SHGs) developed. Other countries of the region made slower and later starts but have since established active microfinance sectors. This working paper includes the following headings: the financial landscape and the emergence of microfinance; limitations and challenges; institutional structures and delivery systems; financing structures; product diversity; transparency and performance; impact and social performance; systems that support microfinance; and conclusions and future perspective.