This note argues that the perception of microfinance as being the answer to poverty problems could be analyzed from a complementary rather than opposing perspective. With the growing role of microfinance institutions (MFIs) in the lives of the poor, it might be construed that MFIs tend to act in place of governments.
The government provides for the policy framework and, to some extent, funds MFI activity. MFIs, in turn, help expand credit access to the poor in remote and un-served communities. This function is perhaps difficult for the government to carry out using its own structure. Similarly, it could have been taxing for MFIs to penetrate hard-to-reach areas without government support. In some instances, MFIs carry government programs to the grassroots such as the propagation of micro-insurance and health services.
In conclusion, the paper states that while MFIs usually have to establish good reputation and acceptance at the local level, they would not be as effective without the support of public leaders in these areas. Both parties acknowledge mutual benefits when they co-exist harmoniously.
