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IFIs - the good, the bad and the ugly

Microrate - the microfinance equivalent of Standard & Poor's - released a new report. It charges international development organizations (IFIs) with funding only the largest and safest microfinance institutions (MFIs) while leaving the most risky ones out. The result:

IFIs are not complementing private lenders, they are crowding them out of most attractive parts of the MFI market. IFIs nearly doubled (88% increase) their direct funding to top-rated MFIs in 2005 […]. Data on over 160 MFIs confirm this trend.

The report is controversial and stirred up quite a debate.

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FMO and KfW, the Dutch and German development banks, would like to shed more light on the MFI lending market and the role and mandate of IFIs in it. To this end, they have jointly published a short paper, entitled 'Reversing the Coin, What IFI's do to change the face of microfinance'. It makes a strong case for the role of IFIs in the development of microfinance.

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