• Commercialisation of microfinance

Commercialisation of microfinance

How can the international community - public and private - contribute to the greatest possible increase in financial service access for underserved people? This focus note from CGAP addresses this question, based on experiences of a scenario-building exercise designed to help anticipate and prepare or the global demographic, political, and technological forces that will shape the future of microfinance. Together with a group of external experts, CGAP staff grappled with the potential impact of these forces in order to craft positive and negative scenarios for the year 2015 that might instruct the microfinance actors today.

The focus note examines these forces and applies them to four scenarios. The note ends with broad recommendations for how the international community can prepare for and respond to these scenarios.

The note asks: "Will today’s focus on microfinance fade away, or will it gather enough momentum to reach most of the billions who still do not have access to financial services?" It presents two scenarios: microfinance in large, emerging market countries that have experienced rapid growth and financial systems development (BRICs); and Low-income countries (LICs) that often have weak economic growth, deep poverty, and unstable governments. It notes that the future of the LICs and BRICs are intertwined, as the former are increasingly dependent on aid from the latter.

Some key points are:

• as countries' urban populations increase and communications improve, delivery of microfinance services becomes easier
• there may also be an increase in youth employment
• wireless technology such as mobile phones may connect more people and improve microfinance delivery but alienate those without access
• aid flows are increasingly being determined by private actors, so their priorities are key in addressing the needs of the very poor

Some of the recommendations are:

• efforts need to go into accelerating the application of mobile phones and other technology to financial services and increasing the chances that poor people benefit
• efforts need to go into increasing the likelihood of positive outcomes for the poor from increased government involvement in retail credit
• we need to ensure that the cause of increasing financial access is well represented in the development and application of financial regulatory standards

• Full text of document
• Publisher details
• Send to a friend