Commercial Returns and Social Values: The Case of Microfinance (Paper)

This paper examines various fundamental aspects of microfinance, seeking to answer the following questions:

• Are the poor a distinct segment or are they part of a continuous market in which relatively minor adjustments to existing business models are sufficient to serve them?
• Are the success factors of commercial microfinance general across geographical boundaries and cultures or are they location-specific?
• How is social value created by microfinance? Are there common measurements for the social value created by any business?
• How can the effectiveness of microfinance, as a response to poverty, be assessed?
• What is the role of economic returns in the fight against poverty? Does the concept of a "fair"? economic return make sense when doing business with the poor?
• When is the creation of economic value and social value antagonistic and when is it complementary? When do high business returns contribute to reducing poverty and when do they increase it?

The paper presents the following conclusions:

• Microfinance has illustrated its power to harness the markets to disseminate interventions that enhance the productivity of the poor.
• Modern microfinance is a good example of how a social initiative can turn into an attractive business.
• Microfinance was born as a response to the needs of poor people and has grown and prospered, while seeking to be a fulcrum for the poor, helping them unlock the potential of their lives.