Knowledge Center / Microfinance 101

A successful and rapidly growing global industry, microfinance is a proven and powerful development tool.
  • Proven model:  Microfinance has been tested and used for over 4 decades.
  • Replicable:  Microfinance has been replicated in over 100 countries globally.
  • Scalable:  There are over 10,000 MFIs in the world today, serving 160 million clients worldwide. Several MFIs have grown to serve over 1 million clients each, and continue to grow rapidly.
  • Sustainable:  Approximately 500 of the largest MFIs are big, profitable, and serve 90% of the world’s microfinance clients. Microfinance loan portfolios are lent not spent and are used over and over again as a powerful community resource.  

Few development programs can boast all these characteristics.

While there are many causes contributing to poverty, and focusing on the immediate deficiencies  facing the extremely poor is necessary work (e.g. food aid, well drilling), enabling the Bottom Billion people the opportunity to work productively, proactively and with dignity, is absolutely part of the solution.

Consider Haiti, a country with one of the largest percentages of Bottom Billion people.  After the 2010 earthquake, 200 billion dollars were committed to relief through medical solutions, water solutions, shelter solutions and infrastructure solutions. This was good work, as many people were helped.

Yet it is not yet clear whether these efforts will help change the incomes of large numbers of Haitian people, or help them care for themselves in the future. There are far more people living in extreme poverty in Haiti today than before the earthquake, even with all the relief money spent. Relief, water, shelter, and medical care are good. They are powerful steps in a positive direction. But by themselves they aren’t enough to help people become more self sufficient.

Enabling the Bottom Billion people to access financial resources and training in order to be able to care for themselves and their families for the long term is critical.

The MFIs that seek to include significant numbers of the Bottom Billion have the greatest challenges to be profitable.  For this reason, MFIs that seek to work sustainably face strong financial incentives to serve a higher percentage of “middle” poor clients.

The extremely poor, in addition to lacking access to capital, live in a world with no safety nets. One illness, one accident, or one funeral can devour a lifetime of limited savings and assets.  An extremely poor person’s lifetime assets may be limited to eggs, chickens, a bicycle, money, or her body.  Women with no financial alternative often turn to prostitution in order to feed their families.

To accelerate the provision of quality microfinance services to those within our global society who need it most – for whom access to financial services to manage meager assets and extreme vulnerability may be a matter of life and death – Bottom Billion Fund brings to market a new investment model to help bring microfinance services to more Bottom Billion people who are capable of benefitting.