Microfinance Meets the Market

In this paper, we examine the economic logic behind microfinance institutions and consider the movement from socially oriented nonprofit microfinance institutions to for-profit microfinance. Drawing on a large dataset that includes most of the world's leading microfinance institutions, we explo...

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Main Authors:	Cull, Robert, Demirguc-Kunt, Asli, Morduch, Jonathan
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Banks Other Depository Institutions Micro Finance Institutions Mortgages G210 Firm Performance: Size, Diversification, and Scope L250 Nonprofit Institutions NGOs L310 Economic Development: Financial Markets Saving and Capital Investment Corporate Finance and Governance O160
Online Access:	http://hdl.handle.net/10986/5554

id	okr-10986-5554
recordtype	oai_dc
spelling	okr-10986-55542021-04-23T14:02:22Z Microfinance Meets the Market Cull, Robert Demirguc-Kunt, Asli Morduch, Jonathan Banks Other Depository Institutions Micro Finance Institutions Mortgages G210 Firm Performance: Size, Diversification, and Scope L250 Nonprofit Institutions NGOs L310 Economic Development: Financial Markets Saving and Capital Investment Corporate Finance and Governance O160 In this paper, we examine the economic logic behind microfinance institutions and consider the movement from socially oriented nonprofit microfinance institutions to for-profit microfinance. Drawing on a large dataset that includes most of the world's leading microfinance institutions, we explore eight questions about the microfinance "industry": Who are the lenders? How widespread is profitability? Are loans in fact repaid at the high rates advertised? Who are the customers? Why are interest rates so high? Are profits high enough to attract profit-maximizing investors? How important are subsidies? The evidence suggests that investors seeking pure profits would have little interest in most of the institutions we see that are now serving poorer customers. We will suggest that the future of microfinance is unlikely to follow a single path. The recent clash between supporters of profit-driven Banco Compartamos and of the Grameen Bank with its "social business" model offers us a false choice. Commercial investment is necessary to fund the continued expansion of microfinance, but institutions with strong social missions, many taking advantage of subsidies, remain best placed to reach and serve the poorest customers, and some are doing so at a massive scale. The market is a powerful force, but it cannot fill all gaps. 2012-03-30T07:33:23Z 2012-03-30T07:33:23Z 2009 Journal Article Journal of Economic Perspectives 08953309 http://hdl.handle.net/10986/5554 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Banks Other Depository Institutions Micro Finance Institutions Mortgages G210 Firm Performance: Size, Diversification, and Scope L250 Nonprofit Institutions NGOs L310 Economic Development: Financial Markets Saving and Capital Investment Corporate Finance and Governance O160
spellingShingle	Banks Other Depository Institutions Micro Finance Institutions Mortgages G210 Firm Performance: Size, Diversification, and Scope L250 Nonprofit Institutions NGOs L310 Economic Development: Financial Markets Saving and Capital Investment Corporate Finance and Governance O160 Cull, Robert Demirguc-Kunt, Asli Morduch, Jonathan Microfinance Meets the Market
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	In this paper, we examine the economic logic behind microfinance institutions and consider the movement from socially oriented nonprofit microfinance institutions to for-profit microfinance. Drawing on a large dataset that includes most of the world's leading microfinance institutions, we explore eight questions about the microfinance "industry": Who are the lenders? How widespread is profitability? Are loans in fact repaid at the high rates advertised? Who are the customers? Why are interest rates so high? Are profits high enough to attract profit-maximizing investors? How important are subsidies? The evidence suggests that investors seeking pure profits would have little interest in most of the institutions we see that are now serving poorer customers. We will suggest that the future of microfinance is unlikely to follow a single path. The recent clash between supporters of profit-driven Banco Compartamos and of the Grameen Bank with its "social business" model offers us a false choice. Commercial investment is necessary to fund the continued expansion of microfinance, but institutions with strong social missions, many taking advantage of subsidies, remain best placed to reach and serve the poorest customers, and some are doing so at a massive scale. The market is a powerful force, but it cannot fill all gaps.
format	Journal Article
author	Cull, Robert Demirguc-Kunt, Asli Morduch, Jonathan
author_facet	Cull, Robert Demirguc-Kunt, Asli Morduch, Jonathan
author_sort	Cull, Robert
title	Microfinance Meets the Market
title_short	Microfinance Meets the Market
title_full	Microfinance Meets the Market
title_fullStr	Microfinance Meets the Market
title_full_unstemmed	Microfinance Meets the Market
title_sort	microfinance meets the market
publishDate	2012
url	http://hdl.handle.net/10986/5554
_version_	1764395468571279360

Microfinance Meets the Market

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