The seeds of the idea were sown back in the 70s near Bangladesh's rural areas, which Dr. Muhammad Yunus initiated. He first started with the Grameen bank project, an organization of community development bank to provide microcredits without collateral. The Grameen bank was sponsored by Bangladesh's central bank in its initial days. With the increasing need and popularity of the project, it became an independent bank via government legislation.

Note: Grameen bank was not the only microfinance program in the 70s; other programs were budding around Chicago.

Present scenario of Microfinance

With time, thousands of microfinance programs started to take their ground in different parts of the world. With the sole purpose of eliminating poverty and providing funds to all financially excluded populations of society, there are now more than 10,000 microfinance institutes running worldwide. More than 130 million people trust microfinance institutions and are a part of the borrowing group worldwide. However, this count is just a few percent of the total population, indicating a massive group of markets untouched.

The South Asian region has been the epicenter of action for most microfinance institutions. About 60% of the microfinance borrowers are from South Asian countries. The majority of the borrowers from the microfinance institutes are noted to be women near poverty. This diversity status is crucial as providing credits to people who cannot otherwise afford it is the microfinance institutes' primary motive.

All these stats indicate that global micro-financing is growing rapidly. The projected borrower count is estimated to reach over 200 million in the coming years.

Future of Microfinance

With time MFIs have been evolving continuously, the introduction of Fintech has helped them immensely. The inclusion of technology opens up new avenues and better ways of origination, repayments, and communication with the clients. The technology will help in providing various services like insurance, savings, and low-cost payment infrastructure.

Payment integrations - The MFIs have utilized Fintech in several ways to get a better position in the market. It can leverage FinTechs for more effective loan repayments and the use of mobile wallets. They are making repayments much more accessible.

Analytics - Technology has helped Microfinance companies enter a new age of analytics.

New Channels - New actors like mobile operators and distribution networks will help offer the financial products and the services at a cheaper cost to the financially excluded society sector.

Global Expansion - In the coming years, microfinance institutes are more likely to spread globally and provide the service to almost all financially excluded sectors giving a great hand to eliminate poverty. Technology will enable microfinance businesses to take their products/offerings to a larger-scale. The institutions are more likely to be focused on the clients and their needs than the products and processes.

Security - Microfinance institutions are also adopting technologies like Finflux to improve security and compliance.

Conclusion

The minor program that started in Bangladesh with a motive to eliminate poverty has come a long way till now, especially after the introduction of Fintech. Currently, the institutions use cutting-edge technology for sanction loans and other financial services to the financially excluded sectors.

Considering the microfinance institutions and programs' overall path, we could conclude that the future seems bright, and the institutions would expand beyond the expectations.

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