Microfinance Tradeoffs: Regulation, Competition, and Financing

Over three decades, microfinance has evolved, mutated, and segmented. Microfinance started as a simple idea--to provide loans to poor entrepreneurs--but today it is a far-ranging and dynamic sector, including institutions that provide savings and remittance services, sell insurance, and offer loans for a wide range of purposes. The sector is bound together by a focus on bringing financial services to the underserved, but institutions vary in the income levels of the customers they serve, the use of subsidy, regulation and governance structures, and the breadth and quality of services offered. While lending remains a core activity, “providing microfinance” now entails a range of possibilities and a variety of models. In choosing strategies, microfinance providers face both new opportunities and trade-offs.