SUPPLEMENTARY ANALYSIS - THE MICRO FINANCE

INDUSTRY

Reach less than 20% of the potential

Approximately 130 million clients. market.

Nearly 3 billion people have little or Stress that sustainability and impact go
no access to financial services. hand in hand.

IFC is one of the global investors in terms of volume with a commitment of 47

projects worth $519 million. IFC cumulative investment portfolio in microfinance
exceeded $3.5 billion, with outstanding commitments of $1.68 billion.
INDIAN MICROFINANCE – CHANGE IN SCENARIO

67% of the 37 Reason:

Shift of focus from
million customers Phenomenal
rural to urban
live in urban India. growth of a few
areas.
It was 31% in 2012. urban focused MFIs.

More urban centric

to cut down Cultural problem of
operational cost and not liking small
improve operational borrowers.
efficiency.
 FROTH AT THE BOTTOM OF THE PYRAMID?

Poor people should be seen as potentially profitable customers rather than mere
charity cases.

Finding profitable ways to meet their demands would empower them.

However, excessive interest rates and lending recklessly to people too poor to
repay has made this idea controversial.

Increase of Microfinance institutions was compared with the subprime mortgage

crisis, however, a large repayment rate(over 95%), no incentives for larger loans and
“financial literary training” has made sure that this problem doesn’t arise.
 PHILANTHROPY OR PROFIT MAKING?

A concrete way to help entrepreneurs in the world’s poorest countries, while still
making a profit.

Is Microfinance profitable? YES. Has it achieved it’s desired social mission?

PROBABLY NOT.

The exorbitant interest rates charged by the MFIs is still a major issue to be taken
care off.
 LEADERS SPEAK

Professor Aneel Karnani (University of
Michigan, Ross School of Business)
argues for a fundamental rethink of
strategy for poverty alleviation, in
which government, business and civil
society, each have an important role to
play.
Jessica Jackley, cofounder of Kiva, says that
the Microfinance programs which really
excel are the ones that incorporate
training to a great degree, and not just
providing just a resource, but providing the
tools, education and the perspective that
somebody needs to make the most out of
those resources.