> Posted by Anita Gardeva
Microfinance captures our imaginations as a scalable strategy to provide the poor with something that they need and that can improve their lives – financial services. In the past several decades, scale is what microfinance has been all about. But how will the industry develop, and what shape might it take in the future?
In Microfinance Insights’most recent cover story, “Microfinance, Scale, and Financial Inclusion: The End of the Scale Mantra,” Center Managing Director Elisabeth Rhyne explains why we have to change the way we think about scale in microfinance if are to attain the ultimate goal of full financial inclusion.
Despite the rapid growth of microfinance, there are still over two billion people who do not have access to financial services, and this gap has inspired discussions around financial inclusion. But how does our pursuit of financial inclusion fit in with the “scale mantra” that we have been chanting within the microfinance industry? As Ms. Rhyne explains in her article, “financial inclusion is the new scale.” Building upon a definition of financial inclusion proposed by the Center, the article highlights the needs to increase scale in a range of products, to increase scale with attention to the quality of financial services, and to increase scale in those markets that are the most difficult to reach.
How will we achieve this new kind of scale? Ms. Rhyne points out that most likely the real scale-achievers will not be microfinance institutions. However microfinance institutions still have a special role to play, and Ms. Rhyne points to four specific ways in which microfinance institutions contribute in the global movement towards financial inclusion. To read more, please find an excerpt and a link to the entire article below…
Microfinance promoters have been chanting a hypnotic mantra for the past fifteen years: scale, scale, scale. The chant invokes a dream of small, sustainable loans offered by thriving social businesses to microentrepreneurs, indefinitely replicated until hundreds of millions of households pull themselves up. The chant says, lend to end poverty.
For years, the microfinance community chased scale. The market was there: the demand high and latent, and at first, the supply was almost non-existent. Scale drove the commercialization of microfinance and the transformation of dozens of MFIs from NGOs into regulated financial institutions. The leaders of MFIs competed for prestige among peers and on the world stage by citing their latest number of borrowers.
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