Case for Support
The Role of Philanthropy in MicrofinanceMicrofinance has reached a tipping point. Over the last 35 years, ACCION International, the Grameen Bank and other pioneer microfinance institutions have proven that the poor are credit-worthy. With a foundation built upon philanthropic support, thousands of microfinance institutions (MFIs) now draw on microfinance as a viable solution to widespread global poverty. Today, these institutions are also demonstrating that they are investment-worthy, ready to tap the capital markets and ensure the sustainability of the industry. However, while the potential of capital market investment is promising, if we are to scale up microfinance and eradicate poverty on a international level, the need for philanthropic supported remains critical.
When microfinance first started out, it was a renegade idea: Lending to the poor was generally assumed to be risky. The pioneers of microfinance knew better, however, and they got to work building an industry on a foundation of institutional and individual donor support. Within a few, short decades, individual and corporate philanthropy has driven microfinance from its infancy to an industry that reaches an estimated 77 million microentrepreneurs.1
The work is far from complete, however. The United Nations predicts that close to 3 billion people live on less than $2 a day – about half the world’s population2. Poverty must be overcome with quality healthcare, education and employment. Microfinance ensures that people will have the financial tools they need to build small businesses, increase their income and pay for better education and healthcare, working their own way out of poverty with dignity and pride.
To help the microfinance industry address poverty on a global level, organizations like ACCION International are piloting new products and processes. MFIs continue to evolve their methods to deliver more and better financial services – savings, business credit, remittances, microinsurance, etc. – to people in poor rural and urban areas quickly, conveniently and cheaply.
Philanthropy remains the essential element to innovation and growth. We need donors and philanthropists to provide the resources and risk capital that allows practitioners to test new products and delivery methods and to enter new markets and geographies that are uneconomical or impractical for the private sector. These funds allow the industry to take, and mitigate, risks in advance of commercial viability. Philanthropy’s support of the scaling up of microfinance will mean the difference between a roof overhead, food for the whole family, and schooling for billions of the world’s people.
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