Microfinance joins the mainstream
Impeccably mainstream banking journal, The Banker, featured in its February 2005 edition an article with this title by Mark Malloch Brown, the head of the UNDP. This was of course linked to the UN Year of Micro Credit (YOM). In the article, Malloch Brown speaks the increasingly popular language of “inclusive financial sectors”, which recognizes that microfinance is irretrievably linked to the broader financial sector, and indeed, is increasingly being subsumed into it in various countries where mainstream financial institutions are entering the lower end of the market in various ways now. Malloch Brown points out that “Citigroup, Deutsche Bank, Santander, ING and ABN Amro are seeing microfinance as a profitable opportunity.”
It is easy to be skeptical about high profile extended publicity events like the YOM. However, one of the effects is to draw attention to the international social acceptability of mainstream banking participation in markets where few dared to tread not long ago because of reputation risk. I believe that the consequences of the tidal wave of capital washing into microfinance from various quarters—commercial and concessional sources—have yet to be seen. The energy created is immense; but if too much money chases too few good opportunities, there is a danger of “bringing the house down” through weakening its foundations. This would not be in the best long term interests of the sector at all--whether private for-profit participants or so called pro-poor micro finance institutions.
