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Understanding International Social Enterprise (2): Microfinance

"Microfinance is an idea whose time has come." - Kofi Annan, 7th United Nations Secretary-General

The first of the five business approaches we're introducing is microfinance. Microfinance is a model in which financial institutions provide banking, lending, and insurance to the poor and disadvantaged who otherwise have no access to these financial services. The impoverished can make use of their small loans to start up business initiatives, and hopefully, to increase their financial independence.

The concept of microfinance was developed by Muhammad Yunus, a Bangladeshi banker, economist and Nobel Peace Prize recipient. His Grameen Bank in Bangladesh is a well-known example of microfinance organization (MFI) and community development bank. Other leading international microfinance institutions include FINCA, ACCION International, and Unitus.

As the microfinance industry becomes more advanced, new initiatives have been introduced to the industry. The adoption of mobile banking (i.e. people using mobile devices to make payments and banking services) allows microfinance institutions to reach greater populations of the poor and to reduce administrative costs. Organizations support MFIs such as The SEEP Network and The MIX Market have also established financial and social performance reporting standards to improve MFIs' efficiency and decision-making, streamline reporting to stakeholders, and establish industrial benchmarking/bet practices through comparable data.

Microfinance is undoubtedly the fastest-growing industry within the last decade, and Social Enterprise Associates has developed substantial resources for people to learn more about this model. Click here to check out our online materials!

Want to know more about international social enterprises? Our Managing Partner, Drew Tulchin, has years of consulting experience in international social enterprises. At this year's Net Impact Conference, Drew will be speaking on the two panels "International Social Enterprise: Operational and Implementation Challenges" and "The Future of Social Entrepreneurship." Come hear what Drew and other great speakers have to say about these topics!

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