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Is microfinance detached from the global crisis?

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A great editorial from responsAbility Social Investments head of research Cécile Koller…

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“Can people escape poverty through microfinance?” This was the key question which had always been raised in the past with respect to microfinance. Since October of last year, however, the focus of attention has shifted to another question: “Is microfinance detached from the global crisis?”.
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Several industry studies have addressed this issue in recent months. It appears that microfinance continues to be detached from the world markets. However, “detached” is not synonymous with “unaffected”: If the crisis reaches the real economy, microentrepreneurs will also be affected. This was confirmed by a study conducted by CGAP (Consultative Group to Assist the Poor) and published in May. It surveyed 400 microfinance institutions (MFIs) worldwide regarding the effects of the crisis on microfinance clients.
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75 percent of the respondents also assume that their business activities will remain stable or even improve over the next six months. A paradox? Not according to CGAP which views this as the willingness of the MFIs to specifically adapt their business activities to a changing environment.
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And the effect of microfinance as an instrument to fight poverty continues to be of vital importance: Poverty around the world has intensified as a result of the crisis. The World Bank estimates that the population living below the poverty line will increase by 53 million people. It is the responsibility of the MFIs, as well as investors, to increasingly shift the social objectives of microfinance into the spotlight. This fact has not gone unnoticed: various new industry initiatives demand greater transparency in the market and more responsibility vis-à-vis the microfinance clients. Efforts are also being made to move forward with a definition of standardized indicators to better measure and monitor the social effects of microfinance.
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Microfinance is an investment with potential, especially for investors seeking a social return, in addition to financial gains. The microfinance industry, which is fundamentally solid, and the millions of microentrepreneurs in developing countries and emerging markets should not have to suffer the effects of the turbulences of the global economic crisis, as they, in particular, are frequently excluded from the financial markets. In view of this, the continued commitment of private and public stakeholders to microfinance makes even more sense.
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