Viewpoint: What the gig economy can learn from the mistakes of microfinance
By April Rinne
Fifteen years ago, I was often told I took the fun out of financial innovation. At the time, microfinance (the provision of small-scale loans and savings products to the economically active poor around the world) was in the early stages of commercialization. Many colleagues, bankers and the general public pooh-poohed the concept, viewing it either as merely a rebranded form of charity or a passing fancy that might get a few eclectic investors but unlikely more than that.
I was an analyst and, later, legal counsel to microfinance institutions (MFIs), investors, and governments in developing countries. My focus on the public policy needs and ramifications of what were effectively new financial services for the world’s unbanked was often seen as a wonky reality check on an otherwise half-baked idea.
Then, in November 2007, Muhammad Yunus won the Nobel Peace Prize for his pioneering work with Grameen Bank in Bangladesh. Almost overnight, microfinance heated up, and unprecedented amounts of capital began flowing into MFIs from India to Kenya, Peru, Bosnia and beyond. Investors began to see the economically active poor as bankable, and the power not only to alleviate poverty, but also to empower women (who represent the majority of microfinance clients) and develop emerging economies. They could return a healthy profit and social return as well. When the global financial crisis of 2008 struck, MFIs were largely unscathed, because their success was not tied to synthetic derivatives in London or Hong Kong, but rather hard-working, entrepreneurial individuals striving daily to build good businesses and provide for their families.
Photo courtesy of University of Salford Press Office.