Maturing Microfinance Institutions: Gauging Results

By Erin Nealer

Microfinance was the trendiest new player in economic development for the first decade of the 2000s. In 2004 Vinod Khosla, founder and CEO of Sun Microsystems, called microfinance “one of the most important economic phenomena since the advent of capitalism.” In 2006 Muhammad Yunus, founder of the Bangladesh-based Grameen Bank, was awarded the Nobel Peace Prize for his work in establishing micro-loans for entrepreneurs struggling to rise out of poverty. Microlending programs such as  Kiva, World Vision Micro, and Zidisha have sprung up to take advantage of the internet, creating peer-to-peer lending programs where individuals can supply small loans or pool funds for larger loans for entrepreneurs all over the world. The ability of microfinance institutions (MFIs) to reach those experiencing the greatest need and to provide long-term solutions for extreme poverty, however, remains uncertain.

The term “microfinance” refers to a broad umbrella of economic opportunities with one common objective: increasing access to financial services for those who are unable to access traditional banks. The theory is that small loans, savings accounts, insurance programs, and other basic financial services will provide the structure necessary for low-income individuals to lift themselves out of poverty, begin businesses, and provide for their families. MFIs that focus on underserved populations – particularly women, those living with HIV/AIDS, and populations in inaccessible rural areas – have the potential to enact great change in the lives of individuals, enabling them to participate in the local and global economy.

Loan Applications - Rachel Strohm in Ghana

Women submit applications for microloans in Ghana. While microfinance is a popular and relatively new vehicle for increasing access to financial services, the lasting impact of microloans on business profits and overall income is negligible. Photo by Rachel Strohm via Flickr.

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The Indian Diaspora Investment Initiative: Leveraging Remittances for Development

By Simone Schenkel

President Barack Obama and Indian Prime Minister Narendra Modi greet attendees of the U.S.-India CEO Forum  in New Delhi, India. Photo Courtesy of the White House Photo via Pete Souza.

In a recent trip to India, President Obama announced the creation of the Indian Diaspora Investment Initiative, a U.S. Agency for International Development (USAID) and Calvert Foundation partnership that allows Indian-Americans to use would-be remittances to support key sectors such as financial inclusion, health, education, and agriculture.

While remittances have long been viewed as critical to supporting low-income countries, most funds are transmitted directly to households rather than to community resources. Through this public-private partnership, investors large and small will be able purchase Community Investment Notes later this year through the Calvert Foundation to fund a variety of social enterprise projects. Continue reading