This research, which has been conducted since 1991, represents one of the few comprehensive studies on the impact of credit on rural households. The findings provide ample justification for the appropriate involvement of donors and national governments in improving access to credit for the rural poor. Traditional banking practices dont work for the rural poor. Requiring borrowers to put up physical collateral and fill out substantial amounts of paperwork ignores the realities of the rural poor. Poor people cannot afford to risk their limited holdings of land or livestock, and illiteracy makes bureaucratic paperwork a daunting obstacle.
Local approaches work best.
There is no single blueprint for providing financial services to the poor that works in every location. However, technical support and training for the poor are preconditions for success. Community financial institutions should be controlled by their members and encouraged to experiment with different approaches to providing financial services and with various savings strategies. Regulations to protect savings and to minimize loan defaults are necessary. Interest rate subsidies are unnecessary.