October 12

Can Microlenders Make a Comeback?

By John Njiraini

Once hailed as a game-changer for the impoverished, microlenders are falling behind in the digital race while online lenders and commercial banks poach their turf.

Back in 2005, UN Secretary General Kofi Annan called microfinance institutions (MFIs) “an idea whose time has come.” A year later, Muhammad Yunus, founder of Bangladesh’s Grameen Bank and arguably the father of microfinance, received the Nobel Peace Prize for championing the creation of “economic and social development from below.”

Fashioned as the ultimate solution to financial inclusion, microfinance was widely expected to explode, boosting developing economies and shaking up the rigid world of bank lending. MFIs entered the financial space by carving out a virgin niche, providing credit access to millions of unbanked people shunned by mainstream commercial institutions.

A decade and a half later, microfinance appears to be on its death bed, as innovations—particularly digital and mobile lending—renders MFIs obsolete.

Photo courtesy of Satish Krishnamurthy.

Source: Global Finance Magazine (link opens in a new window)

Finance, Investing
financial inclusion, microfinance