Microfinance Challenges in Australia
Thursday, 11th March 2010 at 2:24 pm
A new report undertaken by the Brotherhood of St Lawrence and Foresters Community Finance highlights three key challenges facing the future of microfinance development in Australia. The report also provides recommendations on how to address these issues, with the aim of pushing forward debate and discussion.
The report, ‘From the margins to the mainstream: the challenges for microfinance in Australia’ has found that Microfinance development in Australia faces three main challenges:
- The sustainability of the programs developed to date
- Scalability – how programs can be moved beyond the pilot phase
- Impact measurement – how to adequately measure whether programs are having an impact on addressing financial exclusion.
Microfinance offers low-income people access to basic financial services such as small loans, savings, insurance and financial advice.
The Federal Government announced plans in January to invest $7.5 million to pilot approaches for developing a Community Development Financial Institution sector in Australia.
Launching the initiative at the time, The Federal Minister for Families, Housing, Community Services and Indigenous Affairs, Jenny Macklin, said financial inclusion is an essential part of social inclusion and individuals need to build their confidence and skills to manage their money and empower people to build their own financial security.
The microfinance report wants to open up debate and discussion around the issues and challenges facing the microfinance sector in Australia, by putting forward 9 recommendations around these challenges. The recommendations are:
- Broaden the definition of financial exclusion in Australia and undertake more empirical work to examine both the extent of such exclusion and the potential demand for microfinance.
- Give greater focus to the range of products and services that people are excluded from, examining in particular, those programs that support the insurance, remittance, bill-payment and superannuation needs of people living in poverty.
- Adopt a broad definition of sustainability in the microfinance sector that includes the financial impact, and social and institutional elements of sustainability.
- Encourage a more complex engagement with financial sustainability in the microfinance sector, away from prevailing charitable and commercial mindsets.
- Publish data on the true costs of microfinance program service provision to contribute to a debate on financial sustainability relevant to the Australian context.
- Move programs beyond pilot phases to building scale, although pilots have played an important role in demonstration, experimentation and innovation.
- Support programs that examine how microfinance could extend its reach to include the most vulnerable people in our society, and encourage action research around specific target populations.
- Ensure that government, community and financial institutions use a variety of approaches to trial and document microfinance initiatives.
- Channel greater investment into independent reporting on the impact of microfinance initiatives.
The report is based on literature reviews and one-on-one consultations with key stakeholders, and includes a directory of microfinance programs in Australia.
Click the link below to download the full report.