Microfinance Revolution or Footnote?

By October 5, 2017 No Comments

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Microfinance Revolution or Footnote?: The Future of Microfinance Over the Next Ten Years

Most foundations and development finance institutions have moved on from microfinance in search of the leading edge of innovation and impact. They have concluded that their work is done now that leading microfinance institutions (MFIs) are now taking deposits from the public and have definitively cracked the capital markets with healthy balance sheets.

Fortunately for people at the bottom of the pyramid (BOP), no one told microfinance that it has died. The robust IPOs and active trend of mergers and acquisitions indicate healthy commercial capital market interest. Moreover, the industry now has a central role in national financial systems all over the world, with hundreds of millions of clients, affected household members likely approaching one billion, and penetration into the majority of low-income communities in the world. The idea that the poor can constructively use and be sustainably provided with a comprehensive range of financial services -unthinkable 20 years ago- is no longer debated. Policymakers and mainstream financial institutions have recognized that a dynamic BOP finance sector fosters both equitable and sustainable development and the health of national financial systems and economies.

In the context of these mirror image appraisals, 32 microfinance and impact investing participants and analysts from around the world convened March 31 thru April 1, hosted by Lehigh University’s Martindale Center, and sponsored by Calmeadow and the Financial Inclusion Equity Council to explore what role microfinance will play going forward. Overall, the group agreed that while dead to some, microfinance is alive and kicking on the ground and vigorously generating diverse business models and approaches to building economies and social value.

The paper, Microfinance: Revolution or Footnote?, portrays on the comprehensive discussions held at the workshop at Lehigh University and examines key questions about the evolution of the microfinance sector since its inception, more than 40 years ago, and what lessons can be extracted going forward for microfinance and impact investing more broadly.

Written by: Ira W. Lieberman, Paul DiLeo, Todd A. Watkins, and Anna Kanze. Oct 2017.