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Equitable Access to Financial Services: Is Microfinancing Sufficient?
Community of Practice: Financial Services
Microfinance institutions (MFIs) serve the rural and urban poor, especially disadvantaged women. Often, commercial bank branches are far from towns and villages, and the transport costs needed to access them are unaffordable. The poor may even lack the minimum cash amounts required to open bank accounts. Unfamiliarity with the complex procedures and paperwork involved in withdrawing and depositing money can also constrain access. Hence it is unsurprising that MFIs are attractive to the poor. They pool resources to spread risks for both borrower and lender. Traditional networks and peer reviews ensure creditworthiness. Loans are secured through joint liability. And savings cushion seasonal fluctuation in earnings or can be used to pay for social events and production inputs.