Commercial banks and microfinance : evolving models of success
Isem, Jennifer | Porteous, David
There is a vast potential market for retail financial services among low-income clients, and a growing number of commercial banks have successfully entered this market. These are the findings of recent research undertaken by CGAP, the global resource center for microfinance supported by a syndicate of 30 multilateral, bilateral, and private donors. Commercial banks that wish to take advantage of the opportunities in microfinance should carefully evaluate the considerations listed in the decision tree herewith, specifically their own goals, the potential market size and competition, the regulatory environment, and their current infrastructure and systems. Given the differences between classic banking and microfinance, commercial banks need to view microfinance as a new business line, and conduct the same kind of research that any company would entering a new market. The different models outlined herewith offer a range of risk levels for banks, and ways of managing them. While a variety of models are evolving for commercial banks to enter the microfinance market, none is doing it successfully without board and management vision and commitment.
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