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Towards Enhancing the Role of Microfinance for Safety Nets of the Poor

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  • Zeller, Manfred

Abstract

Many of the poor borrow, more save, and most of them demand insurance products or related substitutes. However, most of these financial products, especially those catering towards the need for consumption stabilization are only offered by the informal market. Microfinance Institutions (MFIs) that wish to increase their relevance for the poor are well advised to innovate with financial services for income and consumption smoothing. Public action can further promote innovations by supporting pilot projects and related action research. Evaluations of MFIs that receive financial support by government or donors so as to make a contribution to the alleviation of poverty ought to include checks on whether the MFI provides financial products for income and consumption smoothing, such as precautionary savings services, emergency credit, insurance services, or implicit insurance substitutes. Such checks can be undertaken at low cost by simply looking at the terms of the financial products currently offered, and they can identify other poverty-oriented product innovations that can be easily implemented and can in many circumstances increase the business volume and profitability of the MFI.

Suggested Citation

  • Zeller, Manfred, 1999. "Towards Enhancing the Role of Microfinance for Safety Nets of the Poor," Discussion Papers 280263, University of Bonn, Center for Development Research (ZEF).
    • Handle: RePEc:ags:ubzefd:280263
    DOI: 10.22004/ag.econ.280263
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    1. Jutting, Johannes Paul, 2002. "Die neue Rolle von Sozialer Sicherung für ländliche Entwicklung in Entwicklungsländern," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 51(04), pages 1-9.

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