From Revolution to Evolution: Charting the Main Features of Microfinance 2.0

In an attempt to answer where is the microfinance industry is headed, this essay explains that:

• Microfinance has grown over the last few decades from small group-based lending experiments to include several thousand financial service providers (FSPs) serving a growing portion of the developing;
• The challenge to improve broad based access to financial services still remains;
• Broad based financial services include services that go beyond credit and into other products such as savings, insurance and money transfer services.

The essay reviews literature and empirical evidence from across the world to argue that both the public and private spheres are crucial to the continued dynamism and expansion of the microfinance industry—, the private sector as a continued source of product and process innovations, and the public sector taking on a strong market enabling and development role. Further, the essay states that:

• In the coming years, private innovation will be critical in mitigating costs and ensuring that FSPs are more responsive to client demands;
• Competition and sophistication in the array of products as well as in individual product design are emerging as key to the microfinance industry's future;
• Public policy will need to be designed in ways that meet the challenges of a maturing microfinance industry.