A well-functioning and inclusive financial system is crucial for economic development. The core function of a financial system is to efficiently mobilize financial resources and to channel them into the best possible investments – creating decent jobs, generating taxes and contributing to sustainable development.
For many years, microfinance has been regarded as one of the main instruments to increase access to capital for the poor in order to allow them to establish income-generating activities and escape poverty. However, recent empirical evidence, in particular the growing number of microfinance bubbles, such as e.g. in India and Bosnia, calls for a reflection on which characteristics and components a sustainable financial system should have, and on the potential role of microfinance in promoting local development.
In this context ÖFSE, together with partners, assesses experiences with microfinance and their developmental outcomes, as well as other instruments and conditions for an inclusive financial system.