Microfinance and more

Filed in archive Global Economy on September 22, 2005

Curtis sends in this very interesting community site that discusses how to use the tools of economic development most effectively.

One of the topics in favor lately is certainly Microfinance:

"The microfinance sector is evolving from being predominantly grant driven to a stage where it is looking forward to attracting commercial capital. MFIs have been successfully utilizing commercial debt funds and are increasingly looking forward to commercial sources of equity.

In the past an MFI that achieved a Financial Self Sufficiency of 100% was assumed to have reached the epitome of sustainability. However, Financial Self Sufficiency may not necessarily mean commercial sustainability. In the most widely accepted definition of FSS, the cost put to equity is just the inflation rate, which we know is not true. The cost of equity depends on the risky-ness of the business the equity is invested in and will always exceed the inflation rate by an amount equal to atleast the risk-free rate. In effect FSS puts no real cost to equity."

The site also features several other great resources on how to shape the political agenda to make economic development work.

Check it out.