Commercial Banks and Microfinance

In the past 30 years, microfinance has proven to be a viable solution for the alleviation of poverty through international organizations, voluntary work and donations. Today, the challenge facing microfinance institutions is self-sufficiency. Consequently, the integration of microfinance with commercial banks will provide the necessary scale and outreach in making microfinance a self-sufficient and thus long-term solution for the alleviation of poverty. The goal of my research was to observe the role commercial banks play in microfinance and the challenges that these institutions encounter, having to operate in developing countries. In this respect, the study examines the financial data of four commercial microfinance banks: the Grameen Bank (Bangladesh), the Bank of Khyber (Pakistan), Banco Solidario, (Ecuador), Mibanco (Peru). In addition, the study also presents recent findings in the literature on microfinance regarding the effect of different lending types, interest rates and the delicate trade-off between profitability and outreach.