Bringing microfinance back



Microfinance never went away — it just went mainstream.

The sector still commands the majority of impact investing assets (and most exits in 2016). Microloans and other financial services targeting the poor now have “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,” say Paul DiLeo and Anna Kanze of Grassroots Capital Management and Lehigh University’s Todd Watkins.

The trio led a gathering at Lehigh earlier this month to raise the profile of microfinance among mission-drive investors who might have moved on “in search of the leading edge of innovation and impact.”

They’ve come out swinging. In two posts (here and here) DiLeo, Kanze and Watkins lament the “hyperactivity and incoherence” coming from the impact crowd, while touting microfinance institutions’ “four-decades-deep, hard-earned understanding of heterogeneous needs at the BoP,” or base of the economic pyramid.

Indeed, without microfinance, there’d be no inclusive fintech. It’s no longer debated, the writers suggest, that “the poor can constructively use and be sustainably provided with a comprehensive range of financial services — unthinkable 20 years ago.”

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