Microfinance institutions urgently need to improve management and corporate governance to cope with growing competition and a flood of capital that threatens to erode lending standards, a think-tank warns in a report published today.
Born of philanthropy, microfinance - making tiny loans to the very poor - has come into vogue among commercial banks and international investors, inspired in part by the Nobel prize-winning Muhammad Yunus, founder of Bangladesh's Grameen Bank.
The sector is growing quickly. The number of lenders is rising by 25 per cent a year, and the stock of -foreign capital investment trebled to $4bn (€2.6bn, £2bn) from 2004 to 2006, according to the survey by the Centre for the Study of Financial Innovation.
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