From NextBillion: New Products, New Markets – New Risks? Microfinance Shifts its Gaze to Housing
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Critics have landed plenty of punches over the long years of debate around microfinance's true impact on the poor. But to my mind, the industry's best response to these critiques has been to point to its singular success: Microfinance is "the only social innovation to: (1) reach global scale, (2) build a complete industry infrastructure, (3) tap into commercial capital on multiple continents, and (4) 'produce enough profit to generate actual controversy over the returns to social investments,'" as Grameen Foundation founder Alex Counts put it (paraphrasing a paper by Financial Access Initiative Managing Director Tim Odgen).
Say what you will about its dangers and downsides, that achievement is unparalleled in social business. Regardless of the benefits of traditional entrepreneurship-focused microloans, tens of thousands of MFIs serving some 200 million households in low-income communities around the world provide an impressive platform for social change. The question is: What will the industry do with this platform, as it seeks new ways to make an impact?
Attending the European Microfinance Platform's (e-MFP) European Microfinance Week, as I have for the past three years, has provided some fascinating insights into how the sector is answering that question. The conferences have revealed an industry that's experimenting with new products and exploring new markets – while figuring out how to balance the risks and rewards of new technologies. This year's event focused on a growing need among existing microfinance customers, and one that could draw new clients into the sector: housing.
"Study after study shows housing to be among the top three uses of microcredit, even when loans are designated for business investment," said Christoph Pausch, Executive Secretary of the e-MFP in an interview with MicroCapital, explaining why housing was the conference's 2017 theme. Since housing is one of most families' biggest investments, there's a huge opportunity for microfinance to meet this demand – and yet "the vast majority of MFIs treat housing as a niche product."