During the five weeks I have been in India, the bulk of my exposure to the financial inclusion field has been through the lens of microfinance and MFIs. As I wrote about in my last post, I recently toured the headquarters and field operations of a large, commercial (but socially focused) MFI. As far as my work this summer is concerned, “inclusion” has roughly equaled getting more clients access to credit.
Microcredit is where this field began, but it has certainly swelled to mean much more than that. These days, financial inclusion can describe activities from selling technology that makes credit scoring easier for the poor to innovative forms of crop insurance for rural farmers. But even for the more socially focused, creative MFIs, credit is still their bread and butter. The group model, which allows them to lend to millions with very low risk, provides an easy mechanism for expansion and client retention. The earnings from interest allow for profit and perhaps eventually incorporation into an official bank or public offering. In some cases, profit is reinvested in the form of social programs for clients, such as education or health care. But given that these clients are, by definition, at the base of the pyramid, is credit really enough? Continue reading