The role of non-government organisations in microfinance

This paper contends that international Non-Governmental Organisations (NGOs) have played a substantial role in developing financial services for the poor (or microfinance). Their influence has been greatest in: • Pursuing a broader common vision and mission, particularly towards the poorest; • Offering clients a larger range of products and services; • Better engaging with industry regulators; • Advocating for microfinance generally and conducting research. Furthermore, even in cases where the role of these NGO Networks is no greater than other microfinance network support organizations, it appears the former are more willing to subsidise the costs of these benefits, such as with respect to innovation and creativity. Secondly, the financial performance of the NGO networks and the NGO microfinance institutions themselves do not suffer as a result. Based on the available evidence, there is no significant variation in the performance of NGO MFIs around the world compared to the average for all MFIs. In Asia, the NGOs perform slightly worse than the average in three out of four indicators. Therefore, whilst the long-term trend is likely to see more formal and regulated financial institutions delivering microfinance, the NGO Networks themselves will retain a crucial role in the sector as a whole.