From Microcredit to Microfinance: A Business Perspective
This paper examines microcredit as a business, and attempts to answer social, political and economic questions created by microfinance business ventures.
The paper analyzes the evolution of microcredit from a philanthropic loan of $27 to 42 women by Mohammad Yunus in 1974 to a worldwide movement with a loan portfolio of over $43 billion in 2009. It discusses the following business dimensions of microcredit:
- Human security and social capital;
- Marketing concepts and concerns of MFIs;
- Repositioning of banking sector to extend outreach;
- Financial and non-financial impact of MFIs on local economies and community;
- Financial and non-financial indicators of MFIs’ sustainability.
The paper includes a graphical representation of a theoretical economic model using three variables, namely, labor, natural resources and microfinance funding, to illustrate how MFIs may impact growth in local communities. It opens up several questions on the sustainability of microcredit in the long run, and on how collective emerging societies can change the way industrialized nations will conduct business in the future using microfinance.
