This article talks about the growth of Micronance, and the challenges that remain ahead. Particularly important is the focus on broadening scope of services offered by MFI from financial services products beyond credit (e.g., savings products and insurance) to non-financial products. For more in-depth coverage on this broadening scope of services provided through MFIs, please see recent Monitor Inclusive Markets report Stretching the Fabric of MFI Networks.

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Opportunities at the bottom of the pyramid are driving the buzz today. One of the most significant areas in this category in India is Microfinance - both in what it has been able to achieve over the past couple of decades, as well as in its unrealized potential. Besides the scale of business that is possible in microfinance, what is even more exciting is the scale of impact that is possible through microfinance, in enabling other businesses in that segment.

One of the most significant aspects of microfinance over the past 5 years has been the talent and capital it has been able to attract. From socially-focused entrepreneurs and grants, the industry has moved to attracting the best consumer finance professionals (with an equally compassionate outlook) and large scale institutional financing. This, coupled with the experience that early Microfinance Institutions provided, has led to emergence of this opportunity at an unprecedented scale.

Challenges remain. Whether skepticism around sustainable growth rates, the real social impact or, the threats of the industry crumbling under its own weight by pushing its customers into over-indebtedness. What is encouraging is that the industry players have recognized these potential issues and are working to address them proactively.

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