ABSTRACT

This chapter reviews microfinance’s modest achievements and predicts a bright future.

Microfinance includes credit, saving, insurance, leasing, and pension products. It could inspire healthy risk-taking, improve income, smooth consumption, cushion shocks, avoid distress sales, and empower women. However, these benefits are not yet commonly achieved.

Poverty and remoteness increase the costs and risks for microfinance institutions and therefore reduce the availability of microfinance products. Among people with access to microfinance products, uptake is often modest, and benefits are not normally transformational. Sometimes microloans cause unmanageable debts or disempower women by providing money they don’t control but must repay.

Despite this, microfinance’s prospects are bright. Microfinance institutions are innovating, penetrating more distant rural areas, and offering increasingly appropriate and appealing products. With fast-evolving ICT solutions, this process is likely to continue.

Microfinance products will be increasingly well-placed to reduce short-term hardship and improve long-term prospects, provided two conditions are met. First, there must be a level of stability and a functioning cash-based economy. Second, non-financial problems that keep people poor – such as illiteracy, malnutrition and discrimination – must be addressed in parallel because, in isolation, financial products rarely improve people’s livelihoods.