A wide range of development agencies, philanthropies, and private investors, have committed billions of dollars in a global effort to advance financial inclusion. Public funders, which include multilateral organizations, bilateral agencies and development financial institutions (DFIs), offer a range of funding instruments such as grants, investments, and support in the form of technical assistance. Public funders support financial inclusion as a means to reach development outcomes, such as the Sustainable Development Goals. For private investors, the incentive is the return on investment, whether financial, social, or both. Investments are made using debt, equity, or guarantees and are typically directed to refinancing and strengthening the capacity of financial service providers, improving market infrastructure, and refining the regulatory environment.
Today, microfinance is one of the most advanced asset classes within the impact investing sphere. A diverse range of microfinance investment vehicles (MIVs) channel funding from investors to financial services providers, and increasingly, other types of business models that provide financial services for the poor. By the end of 2016, assets under management of MIVs were about USD 13.5 billion. While MIVs need to generate financial returns, asset managers have developed social and environmental metrics to measure the impact of their investments and are increasingly integrating sustainability and social responsibility norms into decision-making and monitoring processes and practices.
Many funders are now diversifying their investments to include not just microfinance institutions, but also other players in the market who are working on digital financial services, agent networks, and other market infrastructure initiatives.