View basket
What can governments do to promote microfinance?
Many governments have tried implementing microfinance directly and although there are some highly successful government MFIs, such as the Bank Rakyat in Indonesia, most microfinance programmes promoted by governments have performed poorly mainly because they have been subject to political influence. Therefore, in recent years instead of providing financial services directly governments now prefer to focus on:
- Providing a stable macroeconomic environment with low inflation.
- Promoting the microfinance industry in general through, for example, providing payments or credit information systems, and providing prudent regulation and supervision of MFIs in order to protect customers and prevent risks to the financial system in particular.
Both of these are important in promoting greater access to financial services to low income people, improving the quality of those services, and providing a favourable environment in which MFIs can develop.
