Emerging trends in the microfinance industry
Professor CK Prahalad said: “They deserve world-class products and services for the poor.” Speaking in favor of microfinance and microlending targeted at low-income clients, he said it would alleviate some of the problems faced by the poorest sections of society, most of whom survive on less than $2 a day Microfinance is the provision of financial services to low-income clients, including consumers and the self-employed, who traditionally lack access to banking and related services.
Mohammad Yunus, who received the Nobel Peace Prize in 2006 for creating the Grameen Microcredit Bank in Bangladesh, first initiated the US$27 loan in a Bangladeshi village, the loan that launched the microfinance movement. As Dr. Yunus has observed, Grameen Bank is imparting an entrepreneurial culture to millions of Bangladeshi women.
At first, microfinance occurred through donors and philanthropic funds. However, as activities increased, it was imperative to move to a commercial format. Bankers, venture capitalists, technology solution providers, governments, and the general public have realized the greater potential of microfinance.
A wide range of technologies are available to help microfinance providers improve efficiencies, track transactions more accurately, increase transparency, and reach new clients, thereby facilitating financial inclusion. Technology has led to increased deposits by placing easy-to-use ATMs in high-traffic areas. Technology has led to more rural customers. Standard Bank (South Africa)’s easy-to-use low minimum balance “ePlan” account can be opened at serviced ATMs in rural areas where it would be too expensive to open branches.
Banco Compartamos (Mexico’s Microfinance Institution) has put Mexico’s microfinance industry on the map since its initial public offering (IPO) in 2007. About two-thirds of India’s more than one billion people live in rural areas. , and almost 170 million of them are poor. Rural banking and micro-banking is now an industry in India and every bank has a division dedicated to rural, agricultural and micro-banking (RMAG). Banks in India have begun to enter the microfinance lending market, and many are partnering with regional microfinance institutions. Forbes recently released the Forbes 50 list of top MFIs recognizing the industry and its impact.
M&A in the Microfinance Industry: In the News: CGAP and DFID Team Up to Boost Mobile Banking for the Unbanked: GAP, Deutsche Bank, Grameen-Jameel and IDB Join ‘Islamic Microfinance Challenge 2010’ ‘. Samasta a Non-Banking Finance The company, which entered microfinance in 2008, says it is open to geographic mergers. Its goal is to become a financial one-stop shop offering ‘solutions, not products’.
Microfinance has now been seen by the United Nations as the means to achieve the Millennium Development Goal -2015 of alleviating extreme poverty and hunger. Producers of software, hardware and associated infrastructure can recognize this contribution and prepare to contribute to a larger social cause!