Elgar Financial Law series
Edited by Frederique Dahan and John Simpson
Chapter 7: Use of Security in Challenging Environments: The Microfinance Perspective
7. Use of security in challenging environments: the microﬁnance perspective Martin Holtmann* 7.1 INTRODUCTION Microﬁnance has come of age. The top league of the microﬁnance industry currently consists of approximately 940 organizations with combined assets of US$26 billion.1 Around the world, microﬁnance institutions (MFIs)2 are serving tens of millions of customers. Most of them provide access to credit, but many MFIs also oﬀer deposits and a range of other ﬁnancial services such as insurance, housing ﬁnance, leasing, etc. In fact, it is fair to argue that microﬁnance is increasingly becoming integrated in the mainstream ﬁnancial system.3 MFIs operate in diﬃcult environments such as developing and transition economies, post-conﬂict countries, and remote rural areas. MFIs were the ﬁrst providers of ﬁnance in post-conﬂict Kosovo and the Democratic Republic of Congo. A microﬁnance NGO, BRAC, is the leading mass lender in Afghanistan.4 In such kinds of environments, collateral and secured lending present huge challenges. The main goal of this short chapter is to investigate whether the microcredit experience holds any lessons for the future development of the secured lending and collateral reform agendas. * The author would like to thank Christoph Freytag (IPC Frankfurt), Julia Abakaeva (CGAP, Washington, DC), Alexander Yeriomin (Trast Bank, Kiev) and Richard Nalela (ES Global, Kampala) for their valuable contributions and many helpful discussions. 1 The Microﬁnance Information Exchange (MIX) is the most comprehensive and up-to-date source of data and information on microﬁnance organizations. See...
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