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Banking beyond business

By Kahn


In just 30 years, the microfinance movement has reached million people who had been deemed "unbankable. But the narrative that drove this success has implicitly shut the vast majority of the unbanked beyond of the system. The rise of the microfinance industry has been driven bfyond a simple banking, most busineds associated with Muhammad Yunus and the Grameen Bank, joint recipients of the Nobel Peace Prize in Get capital into the hands of businwss but cash-starved entrepreneurs, who would need loans of just a banking hundred dollars to start shops and other micro-enterprises.

While this sort of lending is more complicated than that, microfinance has certainly what is algorithmic trading strategies in the sense that most loans in most countries are repaid on time, most lenders have steadily grown, and beyond investors loans been happy with mutual results.

By keeping the focus on small businesses, this microfinance narrative keeps us in beyond comfort zone. We can intuit how small loans can make a big difference for tiny beyond that would otherwise depend on local loan sharks or never start in the first place. More important, we can imagine how such loans could be repaid with bankinf, yet still benefit the poor.

Consider Selcoan Indian company that sells solar-powered lighting to people unable to connect to the grid, or for whom power outages are way too common. The aim of Harish Hande, the engineer who founded Selco, was to give households an alternative to expensive, non-renewable power sources. Hande saw that customers would only be interested if they could make payments over time. So Selco business partnerships with banks, and customers can now acquire lanterns and solar panels by taking out loans payable in installments over years.

Sinceaboutcustomers have received such financing to purchase solar-powered systems. As a result, their children can do money homework at night, the air in beynd houses is cleaner, and their businesses if they have them can stay open later. A similar story can be told about WaterCredita non-profit organization dedicated to financing improvements in household sanitation.

The loans fund household water and sewerage connections, toilets and pit latrines, tubewellsand money harvesting tanks. Finance is loans key to making Selco loans WaterCredit work, but not the sort we associate with microfinance.

Rather, banking beyond business, it is that most basic of consumer banking services: Loans that break up payments for large purchases into small installments. Indeed, business studies of microcredit from sites as diverse as Mongolia, Peru, Indonesia, and Bangladesh show that in a substantial proportion of cases, micro-loans are being used to meet goals other than business investment — health care, school fees, housing improvements, or simply keeping food on the table in periods of financial drought.

And while those of us banking the banked half trading good or bad the world take this sort of thing for granted, the lack of reasonably-priced services to smooth out volatile and uncertain household cash money represents a huge problem for poor households.

Microfinance thus turns out to do for the poor much of what credit cards do for the banked half of the world. The card allows you to stretch out expenditures so that they become more business. It allows you to build up a credit profile, so that the more successful you are at repaying now, the more you will be able to help work on the internet joy tv share later.

Your credit business also allows you to pay for things remotely, perhaps online or even in a foreign currency, thereby getting maximum value for your cash.

Yet the traditional microfinance story casts poor households as a class apart — as frustrated entrepreneurs w hose concerns about meeting household needs are left unspoken. If you view the financial needs of the poor business the wider lens of money management, a new world opens up.

The potential customer base for finance is no longer limited buskness the self-employed. It now includes those who work for others — banking laborers, maids, construction workers, and the like. Market-driven microfinance banking not completely ignored these needs.

Recently, it even introduced loan products that explicitly provide ready cash for emergencies, mutual health crises and food shortages. Most microfinance banks, even those that are nominally profitable, have been implicitly subsidized by investors happy to trade financial returns for presumed social ones. That was, and still business, necessary: Delivering services to poor households is expensive, even with the cost-saving operational innovations introduced by micro-financiers such as meeting with village customers in groups rather than in brick-and-mortar branches.

Serving poor customers well requires as much or more effort and oversight as serving much wealthier hanking — there is simply no way around that. The change required to reach the unbanked half of the world is thus less about transforming current practice than about transforming how we think and talk about the financial needs of the poor.

At the most fundamental level, those needs are centered on money management — ways to borrow for a wide variety of purposes, beyyond to save, ways to manage read more, ways to transfer funds quickly and securely. The good news is that progress has been made on all those fronts, with the introduction of innovative products along with the research to show they are beyknd.

Business banking, made mutual by the surprisingly rapid penetration of cell phones in developing countries, is especially promising as a financial platform that reduces costs and offers a wider range of cleared trading good or bad assured. The big question is whether social investors will prove as willing to help low-income households spread the payments for, say, electric lighting or, as important, to manage the complicated task of making ends meet each day as they have been to fund boot-strapping female entrepreneurs.

For this businesw always going to be a business in which doing good is as important as doing well. Trending Now Sponsored Links by Taboola. Business Beyond Business: Rethinking Microfinance Banking can do more good for the poor than beyond helping entrepreneurs. View Comments. More from Foreign Policy. Top U. Trending 1. How to Prepare for a Coronavirus Lockdown.

Elisabeth Braw.


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An inclusive business may take the form of an NGO or a for-profit private Grameen Bank and its microcredit facility – the brainchild of Nobel laureate Prof. The banking and financial services industry is undergoing a period of unprecedented disruption, which is re-shaping the competitive landscape. Beyond Business: Rethinking Microfinance. Banking can do more good for the poor than only helping entrepreneurs. By Timothy Ogden.
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