The Past and Future of Innovations in Microfinance

Executive Overview Microfinance is an emerging phenomenon that opens access to capital for individuals previously shut out from financial services. In its direct engagement with the poor, microfinance represents a new way for financial capital to potentially stimulate economic growth in developing countries. However, microfinance is poorly understood, and it remains unclear whether it delivers on its promises. The goal of this paper is to introduce the topic of microfinancing to a wider audience of management researchers and to identify opportunities for future research in this new and growing area.

2018

Now a days the formal banks are dominated due to financial institutions as they provide the services which are widely accepted by the poor due to easy procedures. These institutions can be governmental, non governmental based. There is common problem with these finances that is interest rate being so high which is faced by all the poor people as they approach the Microfinance institutions (MFIs )for the easy process of taking micro loan but they end having more money for repayment due to high interest rates. The purpose of this study is to analyse the performance of microfinance provided service to people, organizations. This study reveal The performance of micro finance in previous years and at present. Microfinance is an individual focused financial services provided to the poor and small scale businesses who lack access to the mainstream finances.

2017

Micro-lending is a financial instrument for providing small loans and other financial services (such as micro-savings and micro-insurance) for the poor segments of the population for the purpose of self-employment or to start-up their own businesses. This method enables them and their families to be employed and economically independent. To better understand the concept of micro-lending in a scientific sense, it is necessary to investigate the circumstances and factors that have created the occurrence of this form of financing. The research in this paper starts from Bangladesh which is considered to be the "cradle of microfinance" in the world. Although there are differences between the countries that have developed microfinance such as population, culture, history, geographical features, economic development etc., there are also significant similarities. The main objective of this study is to determine whether there is a common pattern and to define the corresponding mome...

The global effort at reducing poverty has seen many innovations and among the very innovative ones is the provision of microfinance to the hitherto discriminated economically active poor who lack the three traditional Cs, that is, character , collateral and capacity according to the conventional banks.

In Goodhart C Financial Development and Economic Growth Palgrave, 2004

Microfinance institutions deliver financial services for low-income individuals via innovative techniques. This paper first explains the nature and scope of such techniques, and then delivers an overview of recent trends. In conclusion, the paper calls for international donors' and local governments' support in at least three main areas, so that recent innovations can further enable microfinance institutions to meet both their selfsustainability and social objectives.

Social Science Research Network, 2008

This paper 1 identifies key processes shaping the microfinance sector in the coming decades. The paper examines the geography of microfinance, highlighting differing evolution patterns and challenges across the world. It looks at the widespread adoption of a financial systems approach in the microfinance sector. This is set to continue because of two main processes: a shift in focus from poverty-lending towards financial service provision; and the involvement of formal banks in microfinance. The paper looks at the increasing focus on graduation programmes to support ultra-poor people, linking microfinance to social protection and other services. It outlines the great potential of new, low-cost ICT products to enable the development of new microfinance services. Finally, the need to regulate microfinance is discussed.

European Journal of Service Management, 2018

In the EU terminology, microfinance is defined as a tool to provide impoverished people with a basic access to financial services in the form of loans, savings, money transfers and microinsurance. From the economic point of view, the idea of microfinance should not be any substantial problems with sourcing the capital to support the poorest people who are excluded from the society. If the capital market were ideally flexible, the poorest people should not suffer from lack of capital. The factor that contributes to the fact that capital is not invested in the poorest regions of the world is also the substantially higher cost related to investments made by the poor and unequal access to information (information asymmetry), which leads to negative selection, moral hazard and difficulties with monitoring. In many EU countries, microfinance institutions have been functioning successfully, while the number as well as the value of granted microloans has been rising. Summing up the deliberations regarding the idea and operation scopes of microfinance institutions, it may be said that they are gaining importance not only on the financial market, but first and foremost in social and economic development of many countries and regions, in the developing countries as well as in Europe and in Poland. To enable further growth of microfinance, in view of the achievements made so far by the sector, it is possible to propose scenarios and directions of development with regard to the source of the loan capital. The solution appears to consist of the three scenarios of microfinance institutions development: commercial scenario, social scenario, mixed scenario. The scenarios may neglect some aspects of their operations. Still, they indicate the directions which microfinance institutions may follow and point to those that are the most desirable from both social and economic point of view, also taking into account the local development aspect.

1998

Our knowledge about microfinance in developing countries has been greatly enriched in recent years by the experience of numerous institutions. Different sound technologies and practices of financial services to all segments of the population have emerged; there is no single best practice or optimal approach that could be simply replicated. People and institutions have to find out what suits them best. Through trial and error, they gain the experience which may then be cast into lasting innovations. Five case studies are presented, each with its own lessons concerning viability, sustainability, and outreach: two from Indonesia, two from Nepal, and one from India. In addition, lessons are drawn from the recent financial crisis in Indonesia concerning the importance of a triad of framework conditions: prudential deregulation, macroeconomic stability, and adequate bank supervision. The data are largely based on the author?s field research and consultancy work. --

Microfinance is an area of research whose popularity is reflected by the unique potential for wide ranging socioeconomic outcomes which support political goals unmatched by alternative avenues for financial support. However, despite the large amounts of financial resources funding microfinance across the world, and glorious potential economic benefits, there is no consensus regarding the success or failure of microfinance in achieving socioeconomic political goals. This paper examines the empirical literature on microfinance to establish where microfinance has developed from, the organisation of MFI’s, the success or failure of microfinance, and future research methodological possibilities. It has been found that the success or failure of microfinance depends on the benchmarks to which it is measured. From a social empowerment perspective, microfinance success has been observed. However, from an economic development perspective the results are equivocal. The success of microfinance ...

This paper describes some of the main aspects of microfinance (MF) in underdeveloped countries, showing why it has succeeded in reaching the poor, while traditional banks have not, using innovative devices such as group lending with self-monitoring, short repayments instalments and small loans. The aim of the paper is to show how microfinance institutions (MFIs) can fill the lack of traditional banks in underdeveloped countries, proposing unconventional products and innovative business models. This study also investigates about possible synergies between banks and MFIs, avoiding overlaps and mission drift. It is shown that MFIs can improve their outreach using technological devices such as M-banking. Innovative questions and proposals are illustrated, so as to give an updated and synthetic picture of the state-of-the-art, which might prove useful for researchers and practitioners.