Keeping an Edge: What Will it Take in the Current Microfinance Context?

  • Date Posted: November 25, 2013
  • Authors: Urmi Sengupta, Diana Dezso
  • Organizations/Projects: Enclude
  • Document Types: Evidence or Research
  • Donor Type: Non-US Government Agency

We are at a transformative point in the evolution of the microfinance sector. Governments around the world are embracing the mandate of financial inclusion. Technological innovations are creating new efficiencies and present immeasurable opportunities to extend services to new markets. These developments, among others, are attracting a broader range of providers that will undoubtedly alter the financial landscape. This evolution prompts us to reflect on the future role of microfinance institutions and the degree to which they can respond to the emerging opportunities and challenges. While few dispute the pioneering contributions of MFIs and their member organizations to financial inclusion over the last decade and more, concern over their level of preparedness is well justified.

The information contained in this report represents the collective insights of 39 microfinance association leaders from 33 countries across Africa, Latin America, Eastern Europe, and Asia. These associations are member-based organizations, representing a broad spectrum of financial service providers serving the bottom of the pyramid. As seen by the report’s title, we began with a question: What will it take? Our research sought not only to answer the question but, perhaps more importantly, to assess the degree to which industry representatives were asking this question of themselves.
Microfinance associations are uniquely positioned to facilitate these connections. Associations can, based on their deep knowledge and understanding, disseminate information about the market and its participants, identify incentives for market actors to take on new risks, and help build the capacity of local provider ecosystems. We view this market development role as essential to serving the needs of the industry and ensuring the future contribution of MFIs to the financial inclusion agenda in the years to come.