Making financial systems more inclusive goes a long way towards breaking the vicious circle of poverty; it allows people to borrow, save, and insure themselves against events that otherwise perpetuate their impoverishment. Along with traditional financial institutions, groups that provide microfinance are important to improving access to financial systems for those who have traditionally been marginalized.
Microfinance institutions provide loans to poor entrepreneurs for investment in micro and small businesses, enabling them to generate and accumulate assets, raise household incomes, and improve family welfare. They are a powerful instrument for self-empowerment, enabling the poor – especially women, who are most often the direct beneficiaries of microfinance – to become self-reliant and contributors to the economy as well as their local communities.
G20 leaders recognize the important role microfinance plays in economic development. However, they want to ensure that while encouraging innovation for greater inclusion, financial stability and consumers are protected by including microfinance institutions under the regulatory and supervisory umbrella.
Toronto Centre’s programs for microfinance and microinsurance regulators and supervisors help agencies better understand how to ensure that the regulatory environments helps grow, rather than hinder, these important sectors. They look at how to effectively apply supervisory best practices, taking into account the unique nature of microfinance and microinsurance, as well as how to ensure that consumers’ interests are safeguarded.