New Horizons: Creating Value, Enabling Livelihoods
This paper examines the recent wave of innovations that is transforming the microfinance sector. It gives examples of innovations in products, processes and market mechanisms that are giving poor communities increased access to financial services. It also explores the potential for a UK financial sector initiative to accelerate the development of the microfinance industry. Commercial involvement in microfinance is increasing. Institutions are implementing increasingly sophisticated strategies to approach microfinance as a business opportunity. Innovations that are transforming the industry landscape in the areas of, investment, product development and technical assistance include:
- Growth of microfinance investment vehicles;
- Innovations in onshore and offshore funding;
- Issue of structured microfinance papers;
- Equity investments;
- Remittance-related services and insurance and risk management products;
- New technologies such as ATMs and smart cards;
- Innovative business models for service delivery.
The microfinance industry has proved itself over the last three decades, but commercial capital and mainstream expertise are needed to scale up operations and provide a broader range of financial products. Also, the industry needs to adjust to the rigors of the commercial world and the demand of mainstream investors.
