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Beyond Microfinance: Principles of Access to Finance
November 13, 2009
On this edition of the Wonkcast, I am joined by senior fellow Liliana Rojas-Suarez, who discusses her work as co-chair of the CGD Task Force on Access to Financial Services. Financial regulation—and access—is a hot topic right now, as countries try to reduce the chance of future financial crises, while also ensuring access to financial services. The US House and Senate are currently wrestling with exactly what a revamped US regulatory system should look like.
Liliana explains that the balance between financial stability and increased access to finance is at the root of these debates, and in fact was central to the financial collapse itself. “Even in the United States,” she explains, “many people did not have sufficient access to finance, and, well, nobody wanted to stop the provision of financial services. And that was creating a bubble that ended up in the largest crisis that we have seen in recent history.”
However, shifting too far the other way– trying to ensure stability through strict banking regulation– could deny billions of people around the world access to basic financial services (see David Roodman’s recent blog post examining recent estimates of the number of people who are financially un-served).
Liliana and her task force came up with a set of ten principles that can help policymakers address that dilemma. “The unique thing about the principles is that it takes the forest, not just the trees,” Liliana tells me. “It doesn’t focus on one part of regulation, it basically looks at the entire forest of financial regulation and says, ‘OK we want the system to be stable, but we also want the system to provide financial access.’”
The principles fall into three general categories– financial infrastructure, financial regulation, and other government policies. Listen to the podcast to hear Liliana explain them, and go read the Task Force’s full report introducing the principles here. Have something to add to our discussion? Ideas for future interviews? Post a comment below. If you use iTunes, you can subscribe to get new episodes delivered straight to your computer every week.
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2 Responses to “Beyond Microfinance: Principles of Access to Finance”
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November 17th, 2009 at 3:37 pm
while the ten principles listed provide a comprehensive check list for lending to small entrepeneurs, list is suitable for urban lending. List stops short at providing insight to lending to rural low income clients where thre is a huge gap in satisfying demand, operational costs for lenders limits their capacity to follow up/monitor clients/end users and limited collateral to access credit. I will appreciate feedback on succesful approaches for lending small/low income farmers.
November 20th, 2009 at 12:06 am
I’m working with small farmers in the peruvian amaon region. As Miguel says, it’s very hard to find rural clients. Anyway, it’s not just to find the right client, but a lack of education is the other big problem. making small groups and lend them under the responsability of the group is working ok in this area.