For too long, the microfinance industry has focused on the emergence of a separate and unequal set of financial service providers that do not participate in national clearing systems, preventing them from offering meaningful transfer, remittance, and payment support products; are unlicensed and unable to provide reliable or convenient options for savings; and lack the strength to grow with their clients. In contrast, state-owned banks have the infrastructure and regulated status required to rapidly and profitably extend a full range of microfinance services, but are hobbled by political interference, insolvency, and weak management.

DAI is currently conducting in-depth research to identify a state-owned bank that has the potential for transformation; DAI will then lead the turnaround effort. Project staff are examining cases in which the candidate bank is a government-owned entity that has the potential to become a dynamic, profitable, private bank focused on the low-income market segment. The ultimate goal is to transform the relevant country’s financial sector and create the ability for millions of poor citizens to manage risk and seize economic opportunities.

DAI will use Foundation funds to cover the human resources and associated costs required to take over management control of the bank and will secure funding from other sources for all other expenses, including recapitalization of the bank. After the restructuring, the bank will be sold, and DAI’s team with work with the government to ensure that the new owners continue to offer banking services to the poor.