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The Opportunities and Challenges of Microfinance


I’m just back from a week in Kenya, where the largest Microcredit Summit ever held in Africa took place. I serve on the board of Grameen Foundation USA, a supporter of microfinance institutions worldwide, and we decided to hold our semi-annual board meeting adjacent to the Summit.

I have always been impressed with how ambitious are the goals of the microcredit leaders. Among two of the most important being addressed now are 1) ensuring that 175 million of the world’s poorest families, especially the women of those families, are receiving credit for self-employment and other financial and business services by the end of 2015 and 2) ensuring that 100 million families rise above the U.S. $1 a day threshold, adjusted for purchasing power parity (PPP), between 1990 and 2015. Those are bold and ambitious, wouldn’t you say! But bold goals require bold actions, which these leaders are doing, and it is a lesson for all of us to take to heart in our own work.

The Summit brought together microcredit practitioners, advocates, educational institutions, donor agencies, international financial institutions, non-governmental organizations, and others involved with microcredit to promote best practices in the field, to stimulate the interchanging of knowledge, and to work toward reaching these goals.

Microfinance is very popular these days, and that has turned out to be both a blessing and a curse for nonprofit microfinance organizations targeting the poorest of the poor. The concept of providing a small sum of money to a poor person that leads to breaking the cycle of poverty and becoming self-sufficient is very powerful. As a result, over the last 10 years we’ve seen lots of organizations entering the field, from huge commercial banks to nonprofit organizations to government agencies to online giving sites. Like most things in life, it is becoming difficult to separate the good from the bad, with a growing number of stories about high interest rates and enormous profits. The New York Times had a big story yesterday on microfinance detailing some of the challenges and problems.

It is a cautionary tale for all of us in the nonprofit sector. Blurring lines between for-profit and nonprofit activities make it all the more important that we clearly understand our mission, stay true to it despite the pressures, and understand what makes us different in a crowded and confusing marketplace. In the case of microfinance, most of the new commercial operators are targeting lucrative and profitable markets. Serving the poorest of the poor—those earning under a dollar a day—is still likely to require philanthropic subsidies and a mission-driven commitment.

Bob.jpgThe preceding is a guest post Bob Ottenhoff,  Chief Executive of the Center for Disaster Philanthropy. With an entrepreneurial spirit, strong technology focus, and a quest to make an impact in the world, Bob has the ability to take an organization and lead it into strong performance, sustainability, and industry leadership.

Topics: Nonprofit Leadership and Practice