The central contribution of the microfinance revolution has been the creation of long-term client relationships. More so than tangible collateral, these relationships are the foundation of the incentives structures that govern the interactions between microfinance institutions (MFIs) and their clients – and that contribute to the fulfillment of contract obligations. From this perspective, genuine microfinance has been a kind of ‘relational banking’ for the poor. This interpretation is consistent with the growing emphasis on ‘client centricity’ in financial inclusion and it focuses on the value of the relationship, as measured by its cost and quality. The quality of inclusion, on the one hand, brings together what is valued in the transaction, such as proximity, timeliness, transparency, adequacy with respect to actual client requirements, variety, sufficient amount, reliability, sustainability, respect and dignified treatment - and others. Cost, on the other hand, refers not only to financial charges (interest and fees), but also to all the opportunity costs incurred by the clients.
Since the dawn of the commercialization of microfinance nearly two decades ago, investment in microfinance has been made on a widely-accepted premise: investors will receive a ‘market rate’ financial return, while pursuing a socially-motivated strategy. This premise is so widespread that it has taken on the allure of all groupthink – becoming an accepted truism, without necessarily being true. The double-bottom line – the equal focus on financial and social return – can be deceptive. The dilemma is that while financial return has a clear target, social return is more nebulous. What social return is really being promised? Is serving a certain segment of clients enough? Do additional products need to be offered? What about financial education?