Special Evaluation Study: Microfinance Development Strategy 2000: Sector Performance and Client Welfare (Complete Report)

Abstract

In the Asia-Pacific Region, microfinance is often seen as an effective instrument to help low-income households take advantage of economic opportunities and improve living standards. In May 2000, the Asian Development Bank (ADB) approved its microfinance development strategy to set out a strategic framework and broad guidance for its microfinance operations. Since then, ADB has provided $2.8 billion to support microfinance activities in 21 developing member countries (DMCs). This special evaluation study shows that ADB’s support has been relevant and responsive to the sector development needs of the DMCs. Overall, ADB support performed reasonably well at the macro level in easing regulatory and policy constraints. However, the results have been less than effective in market and institutional development, sustainability of microfinance operations, and outreach to the poor. The study shows that improvements in the policy environment and commercialization of microfinance did not necessarily result in greater outreach to the poor. Sector effectiveness depended on government commitment to reforms, absorptive capacity of institutions, and the country’s policy framework. The average penetration among the countries with ADB support remained low at nearly 20% of the population as of end 2011. Six case countries showed that fewer than 9% of microfinance clients lived below $1.25 per day and fewer than 22% lived below $2 per day.