Microfinance still sustainable, says ADB

Microfinance can help the poorest of the poor reduce the severity of their poverty, an Asian Development Bank (ADB) senior microfinance expert said in the latest issue of Finance for the Poor.

In an article in the quarterly newsletter, ADB lead rural finance specialist Nimal Fernando said there has been uneasiness among promoters of microfinance about failure to reach the poorest - defined as those in the bottom half below the poverty line.

"The core issue is whether it is realistic to expect that microfinance services can be provided to the poorest on a sustainable and large-scale basis," Fernando writes.

He said there are three schools of thought on the issue: those that believe the poorest cannot be reached with financial services on a sustainable basis, those that believe the poorest can be reached on a large scale, and those that believe there is some limited potential for reaching the poorest.

"Contrary to the assertion of the first camp, there is an effective demand among the poorest for microfinance services," he writes. "Though microfinance is not a magic bullet for poverty reduction, meeting this demand will help the poorest to reduce the severity of their poverty and improve their welfare."