Microfinance : Taking off the training wheels

Where does Microfinance go from here Raghuram Rajah asks "...How can microfinance be made more viable? Asking this question relegates financial services for the poor to a separate and unequal existence. Instead, we should ask how we can make financial services available to all. If we focus just on finance for the very poor, the thinking immediately shifts to subsidies and charity, which hurts the quality of service. Not only do the poor lack the collective voice to demand better services, but government money can spoil the credit culture. As one participant in a women's credit cooperative said, 'We don't default now because we would be defaulting on our sisters' money. If we took money from the government, default rates would go up because we would all feel we were defaulting only on the government...What needs to be done? For one, the government should encourage the creation of infrastructure that can allow technology to bring down transaction costs...Perhaps most important, the government should encourage competition in the financial sector. As private sector banks find their traditional businesses coming under fierce competition, they will seek out nontraditional businesses, including providing services to the very poor..."
via PSD Blog