For me, It's always a bit unusual to see macro problems getting solved in a micro way.
It begs the question in my mind on whether sufficient progress to effect a change will ever be achieved.
Microfinance has been a useful tool for promoting financial inclusion to people who are traditionally excluded from the formal financial sector. These are usually financially underprivileged individuals unable to pass the standards set by the legacy system.
So microfinance is like mini banks that reached out to places the bank wouldn't touch and provide them with financial support via services like microsavings, microcredit etc.
This post explores the financial inclusion landscape and how microfinance coupled with other innovations can paint a fresh brush to the whole picture bringing in impactful change.
The Landscape On Financial Inclusion
In the digital age, apart from the access to the right information to climb the wealth brackets, access to the tools and resources that will help facilitate the process has been a huge problem for many in financially underprivileged situations.
Things generally did get better as the space evolved. But there's a noticeable digital divide in regards to financial services. An example is on payment infrastructure.
@nonsowrites made a recent video in which he highlighted that using PayPal to receive money from the outside world isn't available in many African countries.
I observed something similar during my early internet days in which my earnings had to be routed through different gateways before it reached my bank account.
With the lack of payment infrastructure in these locations, individuals residing there are excluded from participating in the global economy despite them already being online.
At another level, there are individuals who can't have an affordable and stable internet connectivity or the lack of digital devices.
All of these hurdles in one way or another has contributed in stifling the growth and progress of financial inclusion.
Enters Microfinance
I wasn't able to be a beneficiary in the realm of microfinance despite several attempts while I was up and coming.
However, I have seen and heard a couple of success stories in which beneficiaries were able to turn around their financial life for good.
The most recent one is a young lady who started a fashion business from the funding she received some years back and is now travelling the world attending fashion parades.
Of course, these success stories are ten in every hundred but it still shows the potential and positive impact microfinance can have in empowering individuals and communities at large with access to financial services.
Although the impact seems almost insignificant in the beginning. We can see the snowball effect forming over time in which individuals that are successful beneficiaries help other individuals who also help other individuals.
This can eventually contribute in boosting economic development in specific areas and reducing the overall poverty level.
Innovations And Beyond Microfinance
Microfinance can really go so far. It isn't easily scalable and achieving sustainability can be hard.
This is where technological advancements come in unlocking the limits of the traditional microfinance models. Two good examples that caught my attention are peer-to-peer lending and crowdfunding.
With p2p, scalability can be achieved because many more people can successfully borrow money which effectively increases the rate of 'success stories'. Balancing both sides of the market is bit of a hard task currently.
Crowdfunding can help fund projects big projects with great impact on the community level such as building a marketplace or a training center for financial education.
Both examples can overtime become a mega snowball that completely alters the financial inclusion landscape for good.
Thanks for reading!! Share your thoughts below on the comments.
