Responsible Finance Forum

Microfinance: Revolution or Footnote?

Ira Lieberman, Paul DiLeo, Todd A. Watkins and Anna Kanze

In March 2017, a gathering of microfinance and impact business practitioners, investors and analysts was held at Lehigh University, sponsored by Lehigh’s Martindale Center, the Financial Inclusion Equity Council, and Calmeadow, and organized by Grassroots Capital Management and LIPAM International. The purpose was to assess the state of microfinancein light of its successes and setbacks, and in the context of the maturation of the sector’s funding mix to amajority of commercial funding amid the growing “impact investing” movement. Has microfinance run its course, to be absorbed by the mainstreamfinancial sector and supplanted by more innovative and disruptive double bottom line technologies and models? Or does it remain a unique—even revolutionary—accomplishment: a scalable and profitable businessmodel that largely preserves its social commitment and represents the best infrastructure for reaching billions of poor families and communities around the world? And can investors—whether commercially-oriented, or social impact driven, public institutional, high net worth individuals and those of more modest means—afford to bypass microfinance given the urgent challenges of climate, inequality, population pressures and the Sustainable Development Goals (SDGs) timetable? With the aim of informing and shaping the dialog about thefuture of microfinance and the broader impact investmentmovement, this paper summarizes the discussion at Lehigh in four parts: (i) Current state of microfinance; (ii) How we gothere; (iii) Current challenges; and (iv) Where do we go fromhere? While multiple viewpoints were expressed and no consensus reached on some issues, in most critical areas the participants’ diverse perspectives coalesced around key findings.