How Can Donors Best Support Financial Services for the Poor?
Donors who support financial services for the poor are advised to search out microfinance institutions (MFIs) that are committed to financial self-sufficiency. Sustainability—the ability of an MFI to cover all of its costs through interest paid by its clients and other income—is a cornerstone of sound microfinance. Financially sustainable MFIs can become a permanent part of the financial system because they can stay in business when grants or soft loans are no longer available. To promote sustainable providers of financial services to the poor, donors are advised to make capacity building a key component of their microfinance programming. Many small MFIs require institution-strengthening grants and technical assistance before they can reach the operational and financial self-sufficiency needed to sustain large-scale growth. The time-intensive task of building institutional capacity includes such varied tasks as designing and implementing a management information system; cultivating str
