New Vision (Kampala)
Nathan Were
18 November 2008
opinion
Kampala — A two-day microfinance forum on the theme "expanding frontiers in rural finance" was held in Bergamo in Italy recently.
The concern of the key presenters and participants was how to improve access to financial services especially in Africa, where the majority of the poor do not have access to these services.
In Uganda, a 2007 study revealed that 62% of the population has no access to either formal or informal financial services. Only 16% utilise commercial banking services, 2% regulated microfinance institutions, and the remaining 20% of the population is shared among non-governmental organisations, savings and credit co-operatives, village savings and loans associations.
Majority of those without access are in rural areas and 66% are women. Access to a well-functioning financial system empowers poor people; it allows them integration into the economy and protection against economic shocks. To increase incomes of the poor so as to enable them acquire capital, manage risk, and work their way out of poverty, there must be appropriate loan schemes for small enterprises.
The Government needs to push financial institutions to come up with affordable and flexible products to target the poor in the countryside. It should also create supportive infrastructure in rural areas to enhance market access for farmers. This needs to be based on information on demand, supply and prices of agricultural products in both local and international markets.
Though microfinance institutions are helping improve access, there costs for loans and savings are still high and unaffordable for most poor people. It is sad that microfinance institutions are much more focused on making profits than fulfilling their mission of eliminating poverty. Thus many people remain without access to financial services.
The way forward is to push for policies that will have formal institutions downscale to reach the people not served. Financial institutions also need to be more innovative. Microfinance institutions are the key players in this struggle since they have more experience in handling lower market segments than banks.
The writer is a Ugandan at the University of Bergamo, Italy
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