Cover -- Half Title -- Copyright -- Title -- Praise for The Microfinance Revolution -- Dedication -- About the Author -- Contents -- Foreword -- Introduction -- Preface -- Acknowledgments -- PART 1    THE PARADIGM SHIFT IN MICROFINANCE -- Overview -- Chapter 1    Supply and Demand in Microfinance -- What Is Microfinance? -- Estimating the Demand for Microfinance -- Informal Commercial Moneylenders and Their Interest Rates -- The Economically Active Poor and the Extremely Poor -- A Poverty Alleviation Toolbox -- The Financial Systems Approach and the Poverty Lending Approach: A Fork in the Road -- Financially Self-sufficient Microfinance Institutions -- Providing credit and savings services profitably -- Reaching scale -- Why Has the Demand for Institutional Commercial Microfinance Not Been Met? -- Why Does Meeting the Demand for Institutional Commercial Microfinance Matter? -- Access to financial services -- Building the self-confidence of the poor -- Notes -- Chapter 2    Shifting the Microfinance Paradigm: From Subsidized Credit Delivery to Commercial Financial Services -- Financial Markets in Developing Countries -- Development of the Financial Systems Approach to Microfinance -- Microfinance in the 1980s: Going to scale -- Microfinance in the 1990s: Developing the industry -- Institutional Sustainability -- Levels of sustainability -- Entering the formal financial sector: scale and depth of outreach -- Pioneers in Large-scale Commercial Microfinance -- Microbanking at Bank Rakyat Indonesia -- BancoSol -- The Old Paradigm: Subsidized Credit Delivery -- The New Paradigm: Sustainable Commercial Microfinance -- Common elements of sustainable microfinance institutions -- Basic operating principles -- Meeting the Demand for Microfinance -- Notes -- Chapter 3    Voices of the Clients.

Do Poor People Understand Microfinance Products and Services, and Do They Know How to Use Them? -- Indonesia: Understanding interest rates -- Kenya: Demand for savings products -- Bangladesh: Managing scarce resources -- Peru: Credit as a launch pad -- Bangladesh: Saving for the future -- Indonesia: Using credit and savings products together -- Can Microfinance Help the Economically Active Poor Expand and Diversify Their Enterprises and Increase Their Incomes? -- The Philippines: Use of microloans at the lower levels of the economically active poor -- Honduras: Developing and financing an enterprise -- Uganda: Building income opportunities with credit -- Indonesia: Building income opportunities with savings -- Senegal: Gaining business experience -- Nicaragua: Leaving the moneylenders behind -- Kenya: Expanding income rapidly -- Can Access to Financial Services Enhance the Quality of Life of the Clients of Microfinance Institutions? -- Bangladesh: "Tell your husband that Grameen does not allow borrowers who are beaten by their spouses to remain members and take loans" -- Uganda: Overcoming malnutrition -- Indonesia: Saving for children's education -- Bolivia: Providing university educations for sons and daughters -- Can Access to Microfinance Help the Economically Active Poor in Times of Severe Household Difficulty? -- Mexico: Supporting the family after her husband left them -- Ethiopia: Supporting a displaced family with her husband in jail -- Ecuador: Rebuilding a business -- Indonesia: Starting over using savings -- Argentina: Starting over using credit -- Colombia: Facing an economic downturn -- Kyrgyz Republic: Living through the collapse of the Soviet economy -- Can Successful Microfinance Institutions Promote the Self-confidence of Their Clients? -- Notes -- PART 2    THEORIES OF LOCAL FINANCE: A CRITIQUE -- Overview.

Chapter 4    Supply-leading Finance Theory -- Supplying Finance in Advance of Demand -- How Credit Subsidies Prevent Sustainable Microfinance -- Large-scale subsidized programs generally do not reach lowincome households -- Subsidized credit programs, especially in state-owned institutions, often have high default rates -- Subsidized credit, channeled to local elites, buys political support for governments-and once offered, is difficult to dislodge -- Borrowers bear high transaction costs -- Loan products are inappropriate for borrowers' needs -- Bank staff time is used unproductively -- Subsidized credit prevents the development of sustainable financial institutions -- Subsidized Credit Programs for Microenterprises -- Notes -- Chapter 5    The Imperfect Information Paradigm -- Imperfect Information in Credit Markets -- Information Flows in Rural Communities of Developing Countries -- Imperfect Information and Rural Credit Markets -- Informal commercial lenders -- Formal sector financial institutions operating commercially in rural credit markets -- Imperfect Information Credit Models and Profitable Microbanks -- Notes -- Chapter 6    Informal Commercial Moneylenders: Operating Under Conditions of Monopolistic Competition -- Informal Commercial Lenders in Microfinance Markets -- The Size of Informal Credit Markets -- Debates about Moneylenders and Their Interest Rates -- "Malicious," monopolistic moneylenders -- Informal moneylenders: "value for the people" -- Informal moneylending as monopolistic competition -- The three views in a development perspective -- Policy implications -- Characteristics of Informal Commercial Loans from Moneylenders -- Flow credit and stock credit -- Interlinked transactions -- Availability of loanable funds -- The "Too Many Lenders" Problem -- Each lender serves a small number of borrowers.

A borrower typically receives credit from one informal commercial lender -- Large lenders use credit layering -- Transaction Costs and Risks for Informal Commercial Moneylenders -- The transaction costs of lending -- Risks -- Are the transaction costs and risks of informal commercial lenders high or low? -- What Interest Rates Do Moneylenders Charge? -- The nature of the data -- Examples of nominal interest rates of moneylenders in developing Asia -- Examples of nominal interest rates of moneylenders in other parts of the developing world -- What Are the Transaction Costs and Other Noninterest Costs for Borrowers? -- The Costs of Borrowing: Comparing Moneylenders with Bank Rakyat Indonesia's Unit Desas and BancoSol -- Making Microfinance Competitive -- Notes -- Chapter 7    Savings and the New Microfinance -- Mobilizing Microsavings: Five Broad Patterns -- Pattern 1: Microfinance institutions that are not permitted to mobilize voluntary savings -- Pattern 2: Savings as the forgotten half of microfinance -- Pattern 3: High savings, with lending as the forgotten half of microfinance -- Pattern 4: Failing at both savings and lending -- Pattern 5: Profitable financial intermediation -- Policy implications -- Forms of Informal Savings -- Cash -- Grain and cash crops -- Animals -- Gold, silver, jewelry, and other valuables -- Land -- ROSCAs and RESCAs -- Raw materials and finished goods -- Construction materials -- Saving by lending -- Deposits with savings collectors -- Saving in labor obligations and expected reciprocation for past contributions -- Advantages and Disadvantages of Informal Savings and Financial Savings -- Emergencies and unexpected investment opportunities -- Managing irregular income streams -- Long-term investments -- Social and religious obligations -- Old age and disability.

Why Does the Formal Sector in So Many Countries Fail to Mobilize Microsavings? -- Different views on mobilizing small savings -- Can mobilizing the savings of the poor be financially viable? -- The Mobilization of Public Savings by Sustainable Microfinance Institutions -- Preconditions -- Designing and pricing savings instruments -- Sequencing a savings program -- Who Benefits? -- Benefits to individuals and enterprises -- Benefits to groups, organizations, and institutions -- Benefits to the implementing financial institutions -- Benefits to governments and donors -- Benefits to the economy, development, and equity -- Notes -- Glossary and Acronyms -- Bibliography -- Index.