As the Microfinance Movement Grows It Encounters New Challenges and Opportunities

In the last few years, the microfinance movement has been widely recognized as a major weapon in the global fight against poverty. It has come to be seen as the means by which millions of the very poor have broken the cycle of poverty. By providing an alternative to a dependence on the local money-lender for capital, microfinance institutions have provided loans, mostly to women, to start new entrepreneurial ventures.This paper will examine the history of the microfinance movement, from its beginnings, to its current global popularity. In addition, the issues and problems caused by the very success in greater access to capital that the industry has long sought will also be examined. The not-for-profit business model traditionally employed by microfinance institutions is examined in comparison to the newer for-profit model favored by many. The advent of some microfinance institutions which charge what many view as exorbitant interest rates is also considered. Finally, the paper will attempt to answer the question of whether or not these changes represent a positive move or simply mission drift from the original concept.This paper was presented May 23, 2008 at the 18th International Conference of the International Trade & Finance Association at Universidade Nova de Lisboa in Lisbon, Portugal.