Global South Development Magazine

Besides the fact that 130 millions of the world’s poor are being served with the microfinance

services, the rapid growth of microfinance institutions has been seen since last three decades.

It can be argued that microfinance has some positive benefits to those who do not have an access to other formal financial institutions. Nevertheless, the focus of microfinance has been so called ‘’social entrepreneurs’’ who are self employed, household based entrepreneurs rather than those who really are qualified for the profitable micro enterprises. 

The poor borrowers who fall below the break-even point in providing loans or deposits below which banks lose money on each transaction. So, there is always profit orientation no matter if it’s a bank, private lenders or poor

borrowers. There is a saying, ‘’A poor gets always poor and the rich gets rich’’ which can be attributed to the availability of resources and their use. 

The money is fungible as always so it might not be congruous for all the poor borrowers all the times, especially for loans that are borrowed in regard to start a business or invest to generate money. The main risk herein for client is to think if they can payback? 

This is as hard question as ‘what came first: chicken? Or Egg?’ To those clients (poor) who don’t really know what generates profits and when? How much to invest? Microfinance can always make sense only when a client starts a successful business and repays so that he /she has some amount of saving to re-invest by their own risk ( risk again! ) . Microfinance Institutions (MFIs) do not seem to be interested in looking at the issue from the borrowers’ perspective and ensuring that the poor don’t get deeper and deeper to the well of loan cycle and poverty from where there is no possibility of coming out.

Tomorrow’s microfinance should not only be lending money to the poor but should also make

investment in them specially to boost their entrepreneurial skills which could be education, training, right guidance to start up the right bag pack for the journey or risk free or less risky investment endeavors. It has often been rightly argued that basic requirements like food, shelter,

and employment are often more urgently needed than financial services. There is no doubt that these contentions are well founded. 

No matter how much water you pour on the bottle there is always a bottle neck point which has to be widened for smooth flow of water inside the bottle without risk of pouring out. So, the microfinance tools cannot always solve the problem of the poor borrowers until or unless the investment is made to train the enterprenual skills and let them be ‘’safe ‘’.

(Dinesh is Silver Lining Creation’s Marketing Manager and can be

reached at dinesh.poudel@silcreation.org)