Microcredit Is Becoming Profitable, Which Means New Players and New Problems

Thursday, April 7, 2005

Large commercial financial institutions, including Citigroup and Deutsche Bank, are now showing interest in microfinance, which could increase access to credit for the poor. At the same time, challenges remain in attracting private capital, lowering costs and interest rates, and developing regulation.
More than 500 microfinance institutions around the world have loaned $7 billion to about 30 million small-business people, says Weigelt, but 300 million could benefit from microcredit to start viable businesses. So far, most of the loans made by MFIs have originated as grants from government or gifts from individuals and foundations. “The big jump now is for microfinance institutions to wean off the donors and subsidies and operate like a commercial bank would,” Weigelt adds.
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Source: Knowledge@Wharton