Financial Sector Policy and the Poor: Selected Findings and Issues

By Patrick Honohan. 2004

177 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Urban Studies

View Paper: https://www.semanticscholar.org/paper/82ce04d6e7f2bbad96c7181cee36b245584e3046

Citations in the corpus

• The Basic Analytics of Access to Financial Services (2006, unknown): “See Ashraf, Karlan, and Yin (2006a,b) for an example of how the introduction of commitment savings product can impact savings rates.”
• Finance and inequality: The case of India (2010, unknown): “This ratio is relatively lower than many other developing countries such as Bangladesh, Indonesia and Thailand where microfinance claims 13.1%, 6.7% and 6.5% of the population as clients, respectively (see Honohan, 2004b).”
• Financial Sector Development, Economic Growth, and Poverty Reduction: A Literature Review (2009, unknown): “Several authors have surveyed this large literature (see, for example, Honohan 2004a, 2004b; DFID 2004; Levine 2004; and Andrianova and Demetriades 2008).”
• Financial Access and Exclusion in Kenya and Uganda (2011, unknown): “Honohan identifies a one per cent ‘threshold effect’ for microfinance outreach, suggesting that few countries have broken through this barrier (Honohan 2004) and while these figures are not strongly suggestive that microfinance has broken through this threshold, the inclusion of K-REP and Equity wou”
• Cross-country variation in household access to financial services (2008, unknown): “Earlier work (using the CGAP data also described above) failed to find any significant cross-country correlation between the density of microfinance accounts and poverty rates (Honohan, 2004b).”
• Bank Branch Presence and Access to Credit in Low-to-Moderate Income Neighborhoods (2010, unknown): “2 Even when they are successful, the reach of these programs remains tiny relative to the population (less than 2 percent of the population is served in developing countries), and their survival is mostly dependent on government or donor subsidies (Honohan, 2004a).”
• On the Efficiency Effects of Subsidies in Microfinance: An Empirical Inquiry (2011, unknown): “4 Honohan (2004) finds that “the largest 30 microfinance firms account for more than 90 per cent of the clients served worldwide by the 234 top firms (and hence for more than three-quarters of those served by all of the 2572 firms reporting to the Microcredit Summit).””
• Microfinance and Poverty—A Macro Perspective (2012, unknown): “claim was based on Honohan (2004) who used the data on MFIs provided”
• Access to Financial Services (2009, unknown): “Increased transparency, formalization, and enforcement of lender responsibility offer a more coherent approach, along with support for the over-indebted (Honohan 2004).”
• Access to Finance in Sub-Saharan Africa: Is There a Gender Gap? (2013, unknown): “Given the limitations of microcredit, both in volume and in outreach, however, it is important to understand differences in the use of formal banking services (Honohan, 2004).”