Microfinance is moving from the margins of the global financial services industry to occupy centre stage. Originally conceived as a not for profit movement centred in the Asian sub-continent and dedicated to improving the lives of the poor through the extension of tiny loans, it now has captured the public imagination, attracted the attention of global banking players and its impact is increasing worldwide.
Central to the increased visibility and commercial credibility of microfinance has been the growing acceptance that a for profit business model allows the microfinance sector the opportunity to extend its outreach massively. The result has been an increasing number of not for profit microfinance institutions (MFIs), many with their roots in non governmental organizations (NGOs), becoming progressively independent of their original donors. Surpluses are being ploughed back into the business while some MFIs have widened their remit to encompass deposit-taking and the most progressive have gone as far as a stock exchange listing.
The success of these institutions has attracted the interest of many mainstream and substantial commercial banks. For some of these banks, their involvement in microfinance is a natural extension to their corporate social responsibility programmes but for many the microfinance sector is increasingly a commercial proposition in its own right, whether through direct involvement or, more widely, the provision of microfinance investment funds.
As the global banking industry takes stock of its more recent practices, microfinance offers not just a potentially attractive business line but a reminder of the power of traditional retail banking.
Microfinance for Profit charts the course of microfinance to its present position within the financial services industry, profiles some of the key operators, examines the appetite of commercial banks and the investment community for microfinance and offers telling conclusions on the likely development of the sector.
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