Financial Sector Development in Africa: Opportunities ... - World Bank

CHAPTER 1
Microfinance in Africa
Alexandra Jarotschkin
Microfinance has been frequently celebrated as a panacea to help remedy
poverty in a financially sustainable way among those who could not be
reached previously: those without collateral and, very prominently,
women. Hence, it is understandable that after the outreach success of
microfinance institutions (MFIs) in South Asia, they were soon to be
spotted in other regions, including Africa. Since their appearance, MFIs
have been credited with the promise of decreasing the levels of financially
excluded people on the continent. A decrease is necessary as currently
countries on the continent display levels of exclusion ranging from
23.5 percent in South Africa (FinScope 2010a) to as high as 78 percent
in Mozambique (FinScope 2009a), with many other countries somewhere
in between. But have MFIs delivered on this inherent promise of
financial inclusion? This chapter will first provide a quick reality check,
pinning down precisely the efficacy of microfinance on the African continent
in terms of growth and outreach in the previously excluded groups.
Building on that clear understanding of the actual situation, the second
part of the chapter will outline current obstacles to the microfinance mission
on the continent, as well as some selected industry and regulatory
best-practice solutions to these obstacles.
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