Stanford Social Innovation Review

The poor are just like everyone else: they do not save as much as they would like.  Yet unlike their richer counterparts, poor people do not receive the cleverly marketed, carefully tested financial products that could help them reach their savings goals more easily.  To enrich the bottom of the pyramid, bankers to the poor should make saving money easier by using the latest findings from economics and psychology.

Research shows that men may be more effective than woman at utilizing microfinance investments. 

How foundations can best support social innovators.

Win beads, give loans.

Two new players in the world’s social investing scene seek financial returns along with social impact.

Commercial microfinance institutions (MFIs) must calculate two bottom lines: alleviating poverty for clients and also generating profits for investors. To achieve the latter goal, some MFIs charge their impoverished clients exorbitant interest rates. The recent Banco Compartamos IPO in Mexico raises a red flag, demonstrating how easily well-intentioned MFIs and their investors can shift from microlending to microloan-sharking.

Critics of microfinance institutions (MFIs) ask them to choose between helping the poor or making money for investors, but this is a false choice. MFIs can have their impact and profit, too, says the author, the CEO of the Grameen Foundation. He sketches a new vision of microfinance as a platform, not a product; one that relies on high volumes, not high margins, and that uses limits on private benefit, holistic performance standards, and third-party certification to help MFIs meet both their bottom lines.

Nobel Peace Prize winner Mohammad Yunus aims for a more just society for all.

Few microfinance institutions articulate what, exactly, their ultimate goals are and how to achieve them. If the goal of microfinance is to alleviate poverty, the authors say, then MFIs should focus on helping their clients build successful enterprises, rather than on making more and bigger loans.

Despite the hoopla over microfinance, it doesn’t cure poverty. But stable jobs do. If societies are serious about helping the poorest of the poor, they should stop investing in microfinance and start supporting large, labor-intensive industries.