Emergence of Microfinance - The context

It is predicted that over 500 million poor people worldwide demand financial services and the present Micro Finance Institutions (MFIs) can serve only a fraction - about 16 million. This huge gap has necessitated the development of microfinance as a global industry.

Many significant changes are being witnessed in the concept, vision and practice of microfinance the world over. The vision of microfinance has changed from “provision of credit” to “permanent access to financial services”. To realize this vision, MFIs, apart from providing finance also provide technical support for the beneficiaries to ensure proper utilization of loans and repayment. At the same time they meet their cost of funds, cost of credit management and cost of default through the spread of interest and generate surplus for the viable operation of microfinance. The emergence of microfinance as a global industry has marked the beginning of a convergence between the business and social objectives. Formed as a development tool for social empowerment, microfinance had given rise to MFIs who have now grown into profitable and sustainable business entities. The microfinance industry is expanding owing to commercialization and the reducing dominance of NGOs (non-governmental organizations), who have either merged with banks or transformed into MFIs. The industry is also attracting significant investment from the capital market.

Microfinance, an Emerging industry is poised to make revolutionary changes in Technology, Methodology & Outreach.