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Commercial banks and microfinance : evolving models of success (English)

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.

Details

  • Author

    Isem, Jennifer, Porteous,David

  • Document Date

    2005/06/01

  • Document Type

    Brief

  • Report Number

    33458

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    World,

  • Region

    The World Region,

  • Disclosure Date

    2010/07/01

  • Disclosure Status

    Disclosed

  • Doc Name

    Commercial banks and microfinance : evolving models of success

  • Keywords

    Micro and Small Business;microfinance;formal financial institution;service company;interest rate ceiling;provision of service;Portfolio at Risk;personal finance education;infrastructure and services;right to inspection;microfinance best practices;deposit account balance;retail financial service;foreign exchange transaction;pledge of asset;commercial bank lending;private commercial bank;double bottom line;access to capital;global financial market;microfinance market;loan portfolio;microfinance institution;microfinance loan;legal entity;outstanding loan;legal entities;loan origination;decision tree;atm network;transaction process;financial statement;loan disbursement;savings account;peer group;regulatory environment;market size;term loan;credit decision;banking authority;strategic partner;branch network;bank contract;field staff;financial information;management service;financial covenant;loan application;small saver;portfolio quality;benchmarking data;regulatory condition;promissory note;Electronic Banking;equity partner;interested investor;responsible actor;portfolio value;business rationale;market factor;agricultural loan;informal markets;money transfer;geographic region;loan client;information service;bank license;cashier service;demonstration effect;agency model;insurance companies;transaction volume;cooperative bank;small loan;domestic transfer;commercial funding;reporting requirement;informal relationship;legal reserve;commercial institution;working capital;microfinance service;basic model;retail market;risk profile;bank's system;commercial loan;Staff policies;indirect approach;banking sector;social priority;savings product;profit margin;state ownership;rural area;asset class;consumer finance;brand name;global resource;private donor;finance specialist;consumer loan;service commission;finance company;system Financial;low risk;interest transaction;contractual arrangement;fixed deposit;market cost;loan loss;ad valorem;international transfer;phone banking;salaried worker;domestic bank;income accruing;Payments for Services;large bank;transaction fee;

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Citation

Isem, Jennifer Porteous,David

Commercial banks and microfinance : evolving models of success (English). CGAP focus note ; no. 28 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/843831468140952870/Commercial-banks-and-microfinance-evolving-models-of-success