This course first examines the development of the commercial microfinance (CMF) industry, as it is occurring today in various parts of the world. The objective is to better approach future trends and options by understanding present trajectories and by focusing on the dynamics of the industry. The emphasis is on commercial microfinance industry leaders and on their varied institutional components that add up to long-term sustainable provision of financial services at the lower end of financial markets. The discussion then turns to how commercial microfinance is changing now—and how it might change over the next 10 to 20 years. What would define an industry leader in 10 years? In 20 years? Among today’s leading CMF institutions, what will distinguish those that are industry leaders in 10 years time, and those that are not? This is a discussion course, with participants encouraged to share experiences and ideas.
Three main themes underlie the course throughout:
(1) The commercial microfinance (CMF) industry. What is the emerging CMF industry? Why does it matter? What are the contributions of commercial microfinance to social and economic development?
(2) Current dynamics, trends, technologies, and trajectories. These include new kinds of entrants into the market; rapidly growing competition in some areas; new kinds of risks (and increased intensity of some of the old ones); innovative information systems and many other technological advances, including various kinds of electronic banking; increasing dominance by leading regulated financial intermediaries, some of which are competing in multiple countries; and a growing emphasis on the business of large-scale microfinance. The roles of central banks, rating agencies, investors, service providers, and others are discussed. And political issues—often crucial in CMF—are considered. Among the questions raised: What are the common characteristics of large, CMF industry leaders that operate profitably on the large scale? Who are the new competitors? What obstacles do they face—old and new? Is the development of CMF now irreversible?
(3) The future: CMF in 10 – 20 years. The CMF industry has many industry leaders and multiple new players, many of them twenty-first century creations. Commercial microfinance is increasingly becoming perceived— by corporate leaders to whom it was previously invisible— as a new, profitable industry with vast unmet demand. Given this rapidly changing industry, and the likelihood that new technologies will open up increasing possibilities for branchless and electronic banking, how might CMF develop over the next 10 - 20 years? What will be the risks? Who will benefit? Emphasis will be placed on the role of microfinance within the more inclusive financial sector likely to be in place at the time.
Specific topics for consideration will include:
CMF industry leaders: underlying commonalities. CMF industry leaders are found in all major regions of the world and among different types of institutions. Institutions that achieve large-scale microfinance outreach profitably typically share a common underlying set of characteristics. Among those discussed will be country context, ownership responsibilities, governance, management, organization, technology, funding sources, human resources, efficiency, knowledge of the microfinance market, staff training and incentives, and corporate culture.
Problems and risks faced by CMF institutions aiming at industry leadership. These include obstacles— in the macroeconomy and policy, the political arena, the regulatory framework, the country environment, and in the institution itself—as well as growing competitive pressures that carry new kinds of risks and require increased focus on the dynamics of market positioning.
Characteristics of the global microfinance industry itself— and the process by which it is becoming integrated into the formal financial sector. In this context, issues for discussion will include the roles of some of the many kinds of stakeholders now involved, the growing importance of public regulation and supervision of MFIs, and the development of industry standards.
Present trends, along with our respective crystal balls! These will be used to discuss possible developments of the CMF industry over the next 10 – 20 years. What will be the extent of its incorporation into the financial sector? And what will be the effects? Topics will include the roles of central banks, investors, technology, domestic and international competition, strategic alliances, mergers and acquisitions, joint ventures, multinational ownership of microfinance providers, institutional operations in multiple countries, and roles of investors and donors. And most important, what effects is the growing CMF industry likely to have in future on a continuing rapid increase in the numbers of low- and lower-middle-income clients who receive demand-driven products and services from the financial sector? Prerequisites Some background in commercial microfinance is necessary. Interest, knowledge, and experience with MFIs providing large-scale outreach profitably to the economically active poor will be helpful. This course is not about MFIs generally; it is about commercial microfinance industry leaders in the developing world. The course is designed to be of use in various ways to the different stakeholders of today’s commercial microfinance industry.
Prerequisites:
Some background in commercial microfinance is necessary. Interest, knowledge, and experience with MFIs providing large-scale outreach profitably to the economically active poor will be helpful. This course is not about MFIs generally; it is about commercial microfinance industry leaders in the developing world. The course is designed to be of use in various ways to the different stakeholders of today’s commercial microfinance industry.
Day 1. (a) Introduction to the course; (b)The commercial microfinance industry. What does it do? What does it not do? Who are its clients? Why does CMF matter?
Day 2. The CMF Industry and its Dynamics. Topics include: What makes an MFI an industry leader? Common characteristics of industry leaders providing microfinance profitably on the large scale. Obstacles —old and new. Market shares. Roles of central banks, rating agencies, investors, service providers, others. New entrants into the market at various levels. Rapidly growing competition in some areas. Strategic alliances. Technological advances and information systems.
Day 3.Examples of industry leaders. Successes, failures, risks, and unsolved problems in the CMF industry. How is commercial microfinance like/unlike other industries? How are the new kinds of entrants changing the industry? Who benefits from CMF services? Who among economically active poor and lower-middle income people are still excluded? How does the emerging global economy and the awakening interest on the part of the corporate sector in low-income financial markets affect microfinance? What current CMF trends might be used in forecasting CMF in 10 – 20 years?
Day 4. Microfinance in 10 – 20 years. What effects will the intervening years— likely marked by a globalizing economy, the opening of low-income markets, and the gradual incorporation of microfinance into the financial sector—have had on commercial microfinance? Who will microfinance clients be, and what will they demand? Who will be the suppliers? What do current and potential CMF industry leaders need to do to remain leaders in 10 – 20 years? What should governments, investors, donors, training institutions, service providers, and others do to ensure continued rapid growth of large-scale CMF outreach in developing countries in the coming two decades?
