Funding for BOP in Emerging Markets: Organizational Forms and Capital Structures of Microfinance Institutions

Microfinance institutions (MFIs) have a long tradition of providing financial services to the poor, also known as the base of the pyramid (BOP). For for-profit or nonprofit MFIs, funding the BOP’s entrepreneurial projects requires the use of costly resources with few or no collaterals, while MFIs in emerging markets have limited access to financial markets to fund themselves. This manuscript reviews the relevant literature on microfinance to unveil how organizational form relates to the funding sources (resource acquisition) and the performance metrics in these institutions. We propose a simple framework that identifies two (2) main groups of MFIs based on their foundational logic, defining them as socially-oriented and commercially-oriented MFIs. For each group, the dominant organizational form is described in the context of its capital structure and performance metrics, and based on these findings, insights are offered to address practical issues in the resource acquisition of social enterprises serving the BOP in emerging markets.