Push to Quell Overindebtedness

October 13, 2011

A new report from CGAP (the Consultative Group to Assist the Poor) finds micro-lenders stepping up efforts to make sure poor people have access to responsible financial services offerings.

A Focus Note titled Responsible Finance: Putting Principles to Work, CGAP says this evolution toward improved client awareness is a plus for the institutions and clients alike. For example, the group notes, stronger client protections can lead to greater loyalty and demand for services. Failing to create consumer protections, on the other hand, could usher in greater government oversight and scare away potential investors, the authors explain.

"There is a far more realistic understanding now of the need for better internal controls, for institutions like credit bureaus, and for sound regulation, all with a view to providing responsible finanve to the 2.7 billion people [worldwide] still without acess to formal savings or loan accounts," says Kate McKee, one of the the authors of the CGAP Focus Note. "Microfinance providers are showing they have learned that they have to do more to protect their client base, not just growing it."

7,000-plus microfinance institutions dot the globe today

_{- World Bank}