How Microfinance is Helping Poor Households and Businesses Survive and Thrive: 6 Things to Know (2024)

Rural women, low-income households, and the often tiny businesses they manage are all too often starved of finance in Asia and the Pacific. Most formal financial institutions view them as high risk and high cost, as the transactions are often small and the clients in hard-to-reach locations.

Microfinance can break down these barriers. It helps low-income households to stabilize their income flows and save for future needs. In good times, microfinance helps families and small businesses to prosper, and at times of crisis it can help them cope and rebuild.

Here are six ways ADB is using the power of microfinance to level the financial playing field for poor communities across the region:

1. Supporting microfinance institutions to ensure funds for low-income borrowers.

Microfinance institutions (MFIs) across Asia and the Pacific struggle to get commercial funding to provide financial services to their borrowers. ADB partners with international and domestic financial institutions to support MFIs. ADB’s Microfinance Risk Participation and Guarantee Program facilitates local currency lending to the microfinance sector. Since 2010 the program has assisted 35 MFIs that have provided microfinance services to over six million borrowers in Bangladesh, Cambodia, India, Indonesia and Myanmar. As a part of ADB’s COVID-19 pandemic relief and recovery response, the program’s size has been increased to help support microfinance in difficult conditions.Source: Microfinance Risk Participation and Guarantee Program,ADB Triples COVID-19 Response Package to $20 Billion

2. Empowering women by financing micro, small and medium-sized enterprises.

Many micro, small, and medium-sized enterprises (MSMEs) are women-led and owned, so providing them with better financial options will improve women’s livelihoods and incomes. In Pakistan, MSMEs account for more than 90% of all enterprises. ADB partners with one of the country’s leading microfinance service providers to expand its lending operations, especially for women borrowers. The assistance will give Pakistani women and women-led MSMEs access to much-needed long-term financing to develop their livelihoods and incomes.Source: Expanding Access to Credit for Women

3. Delivering access to education as well as finance for rural women.

Microfinance services are helping rural women gain financial independence and empowering them to make good decisions. In the People’s Republic of China (PRC), around 45% of the rural population lacks credit access, especially women who usually have neither physical collateral nor the education needed to organize their finances. ADB’s partnership with CD Finance Management (previously called CFPA Microfinance Management) provides microcredit to poor rural households, targeting at least 121,000 women borrowers and includes measures to improve their financial planning skills and literacy.Source: Microfinance in Poverty-Stricken Counties(People’s Republic of China)

4. Helping to rebuild post-conflict communities and revive women’s livelihoods.

Women are often the most severely affected when communities are disrupted by armed conflict and by persistent regional economic disparities. In parts ofVisayas and Mindanao, the central and southern regions of the Philippines, decades of lagging economic growth and conflict have hampered development and lowered income levels to below the national average. ADB is financing one of the country’s largest microfinance providers, ASA Foundation Philippines Inc., that focuses on women owners of micro-enterprises in these challenging regions to enhance their access to finance and build their economic base. Through this project, women are getting better access to credit, allowing them to improve their living conditions and help rebuild their communities. The financing was released during the COVID-19 pandemic, bolstering ASA’s resources at a critical period for on-lending to women suffering severe economic distress in these fragile regions. Source: Fostering Women's Empowerment Through Financial Inclusion in Conflict-Impacted and Lagging Provinces

5. Leveraging microfinance to help businesses and livelihoods outside capital cities.

Small businesses in regional towns need financing sources to help them maintain operations, invest in technologies, and grow businesses. In Georgia, more than 60% of people live in secondary towns and rural areas, where small businesses and agricultural livelihoods can generate jobs and raise incomes. ADB supports banks in Georgia that primarily provide microfinance services to help develop businesses outside of Tbilisi. Source: Financial Inclusion for Micro and Small Enterprise Growth

6. Nurturing small businesses to help diversify economies.

In Mongolia, natural resources account for 20% of gross domestic product and 80% of export earnings. Still MSMEs account for 90% of the country’s registered businesses and generate half of all jobs. To help these businesses expand, ADB is providing XacBank, Mongolia’s market leader in MSME financing, with long-term stable financial support. More financing helps to create growth opportunities for business and new jobs, supporting efforts to diversify Mongolia’s economy beyond mining. Source: Micro, Small, and Medium-Sized Enterprises Financing Project