This publication is a section of the WHH position paper on rural development.
The support for financial services can make a significant contribution to reducing poverty and to the sustainability of rural development – but only if they are adapted to local conditions. Functioning financial services are essential to allow the rural poor to take part in regional and national economic activities and to ensure that development processes are sustained.
Experience so far has shown, however, that the availability of micro financial services is not automatically linked to economic development and poverty reduction. For this reason, micro financial services should be combined with supplementary social and economic measures.
For micro financial institutions to function satisfactorily, governments must regulate the conditions in the financial markets in such a way that the micro financial services are attractive, without triggering negative social effects.