Asymmetric Finance: Issues in Microfinance

This study surveys microfinance institutions (MFI) which are designed to provide loans and other financial services to the poor, particularly women. Although innovations have reduced loan defaults, most MFIs are losing money. The most profitable MFIs target the upper-end of the poor thereby raising concerns of mission drift. Because profitable MFIs tend to be the largest and most experienced, there is hope that growth over time will lead to self-sufficiency. Increasingly, MFIs are evolving into full-service entities which are raising increasing amounts of commercial funds.