Are the Poor Too Poor to Demand Life Insurance
by Rajeev Ahuja and Johannes Jütting

Community based microinsurance has aroused much interest and hope in meeting health care challenges that face the poor. In this paper we explore how institutional rigidities, such as credit constraint, affect the demand for health insurance and how insurance could potentially prevent poor households from falling into the poverty trap. In this setting, we argue that the appropriate public intervention to generate demand for insurance is not to subsidize premium, but to remove these rigidities (i.e., ease credit constraint). Thus from an insurance perspective as well, our analysis highlights the importance of the poor having the appropriate saving and borrowing instruments.

Microcredit in Rural Bangladesh: Is It Reaching the Poorest?
by Dipankar Datta

During the last decade microcredit has exploded in Bangladesh, as well as in a large part of the third world. Empirical studies give strong evidence that microcredit has had positive effects on two vital areas of national development; namely, the alleviation of poverty and the empowerment of women. Despite these positive impacts, some critics question the efficacy of microcredit in reaching the extreme poor. Some argue that while microcredit has contributed positively to the well-being of the poor in general, it has failed to reach the poorest of the poor. This paper explores the reasons why microcredit programs rarely reach the poorest of the poor in rural Bangladesh. The reasons have been divided into five categories: (1) supply, (2) demand, (3) NGDOs’ norms and social issues, (4) voluntary and involuntary dropouts, and (5) sustainable financial services. This paper also argues that microcredit alone is not necessarily the best way to help the poorest of the poor.

Community-Based Savings and Credit Cooperatives in Nepal: A Sustainable Means for Microfinance Delivery?
by Chris D. Gingrich

Savings and credit cooperatives (SCCs) provide a variety of microfinance services to households in three of Nepal’s distinct regions—the Hills, Terai, and Kathmandu Valley. Nearly all Nepali SCCs are self-funded using member savings and equity. Most Nepali SCCs are also profitable, including those located in poor, remote areas of the Hills region. Key reasons for the SCCs’ strong financial performance include reliance on member savings and control of administration costs. High-profit SCCs also show superior interest earnings on loans compared to low-profit SCCs. Nepali SCCs do not need concessionary funds, because they are already profitable and able to mobilize member savings. While savings-led microfinance in Nepali SCCs is a slow process, there is significant long-term outreach potential in local communities. The government and donors should pursue institutionbuilding strategies to strengthen Nepali SCCs and should not provide concessionary funding.

Microfinance and Poverty Alleviation in the Caribbean: A Strategic Overview
by Jonathan G. Lashley

The following paper highlights the main issues that emerged from the results of a recent study into microfinance in the Eastern Caribbean (Lashley & Lord, 2002), of which the primary aim was to make recommendations for the best practice for successful microfinance provision. It appears that despite a number of operational issues that need to be addressed, the first step in realizing a successful microfinance sector in the small states of the eastern Caribbean is to first define what is meant by “success.” In other words, donors, providers, and recipients need to be cognizant and explicit in defining the aims and uses of microfinance.

Book Review
Building Businesses with Small Producers: Successful Business Development Services in Africa, Asia, and Latin America Edited by Sunita Kapila and Donald Mead
by Elizabeth Porter

Book Review
The Miracles of Barefoot Capitalism: A Compelling Case for Microcredit by Jim Klobuchar and Susan Cornell Wilkes
by Naresh Singh

Financial Performance of Microfinance Institutions: A Comparison to Performance of Regional Commercial Banks by Geographic Regions
by Michael Tucker and Gerard Miles

The number of microfinance institutions (MFIs) making small loans to the developing world’s poor has grown to over 7,000. With growth has come increasing competition for scarce funding. Few MFIs have reached self-sufficiency, and fewer still have made the transition to regulated financial institutions. Comparing the performance of MFIs that have attained self-sufficiency with those that have not and comparing both to regional commercial banks in developing countries on selected financial ratios reveals self-sufficient MFIs are strong performers on ROA and ROE. The majority of MFIs, however, are very weak and in need of continued subsidies. Providing financial services to the poor is an expensive proposition and may mean numerous MFIs will not reach self-sufficiency.

Environmental Protection and Microenterprise Development in the Developing World: A Model Based on the Latin American Experience
by Mark D. Wenner, Norman Wright, and Abhishek Lal

Microenterprises constitute the vast majority of business firms in low- and middle-income developing countries. In Latin America, the sector contributes significantly to employment and gross domestic product. Recently, the expansion of microlending programs has been viewed as an effective means of developing the microenterprise sector and alleviating poverty. However, the nexus between microenterprise development and environmental degradation has remained largely unexplored. It is suspected that the pervasive informality of the microenterprise sector, its sheer size, and the high incidence of poverty in the sector contribute to cumulative environmental degradation and low standards of occupational safety. This paper highlights commonly observed patterns of pollution and occupational safety risks in the sector and examines feasible ways of promoting improved environmental management and occupational safety. The main recommendations are that microfinance institutions should not be excessively regulated and that environmental and occupational safety issues in the sector should be confronted directly through a combination of private and public actions. In addition, microfinance institutions can and should begin to take steps to promote environmental awareness and ecoefficiency among clients and limit their own exposure to lending risks due to environmental and occupational safety problems.