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Title:Networks of Micro and Small Enterprise Banks: A Contribution to Financial Sector Development PDF Logo
Authors:Schmidt, Reinhard H.
Von Pischke, J.D.
Issue Date:2004
Series/Report no.:Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting 126
Abstract:The paper is a follow-up to an article published in Technique Financi?re et Developpement in 2000 (see the appendix to the hardcopy version), which portrayed the first results of a new strategy in the field of development finance implemented in South-East Europe. This strategy consists in creating microfinance banks as greenfield investments, that is, of building up new banks which specialise in providing credit and other financial services to micro and small enterprises, instead of transforming existing credit-granting NGOs into formal banks, which had been the dominant approach in the 1990s. The present paper shows that this strategy has, in the course of the last five years, led to the emergence of a network of microfinance banks operating in several parts of the world. After discussing why financial sector development is a crucial determinant of general social and economic development and contrasting the new strategy to former approaches in the area of development finance, the paper provides information about the shareholder composition and the investment portfolio of what is at present the world's largest and most successful network of microfinance banks. This network is a good example of a well-functioning "private public partnership". The paper then provides performance figures and discusses why the creation of such a network seems to be a particularly promising approach to the creation of financially self-sustaining financial institutions with a clear developmental objective.
Subjects:Development finance
institution building
credit rationing
corporate governance
networks
JEL:O17
O16
Document Type:Working Paper
Appears in Collections:Working Paper Series: Finance and Accounting, Universität Frankfurt a. M.

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