The link between microfinance and social safety net programmes

Abstract

There have been various debates as to the effectiveness of microfinance in reaching the poorest of the poor. Hence the scope of this research is to assess the effectiveness of microfinance as a means of targeting the destitute poor. What is the result achieved when combining microfinance programmes with social safety net programmes as a means of alleviating poverty? The research consisted of secondary data mainly compiled from CGAP, MIX, and the World Bank. The study has been conducted over the ten-year period 1999 to 2009 for the five major developing regions; Asia, Europe and Central Asia, Latin America and Caribbean, Middle East and North Africa, and sub-Saharan Africa. Several indicators were used to analyse both poverty numbers and microfinance outreach level including poverty headcount ratios, gross domestic product, number of institutions and borrowers, and the client poverty level. Each region has seen an overall decline in poverty rates, especially in Asia and Sub-Saharan Africa. Yet both regions still have the highest poverty rates when compared to the other three regions. Although all regions are highly under-developed, their GDP per capita is gradually improving. The state of microfinance in the respective regions has progressed between 1999 and 2009 which is illustrated by the fact that all five regions have increased the number of microfinance institutions. The number of active borrowers per region has also increased albeit one must make allowance for certain externalities such as the financial and economic crisis that resulted in a decline in borrowers during particular years. The client poverty level was finally observed to assess the microfinance outreach level to the destitute poor. This sector has seen great improvements, however, microfinance inst The case studies chapter illustrates that with careful planning and constant monitoring, microfinance and social safety net programmes are a step towards reaching the poorest of the poor.