Resources

Chu, Michael / 2007. Commercial returns at the Base of the Pyramid.
Innovations, 2 (1-2): 115-146.

As the world is introduced to microfinance as a response to global poverty, public and private decision-makers run the risk of having their analysis of the industry overwhelmed by the field’s stirring capability to generate social value. Throughout the development of microfinance, the accounts of low-income men and women in developing nations whose lives are changed by a few hundred dollars of loans or savings have always tended to crowd out the income statements and balance sheets of the institutions delivering those products and services. This is further reinforced by the Nobel Peace Prize honoree Professor Muhammad Yunus himself, who in his acceptance speech identified “two sources of motivation, which are mutually exclusive, but equally compelling—a) maximization of profit and b) doing good to people and the world.” Given these circumstances, it may be timely to subject microfinance to a series of fundamental questions: Is microfinance a legitimate commercial market? As an activity centered on the base of the socioeconomic pyramid, can it sustain levels of profitability that are comparable to those obtained at the top? If microfinance is a commercial activity, are the poor a distinctly separate segment, or are they part of a continuous market in which relatively minor adjustments to existing business models are sufficient to serve them effectively? How has the business model of commercial microfinance evolved? Are models at the base of the pyramid essentially stable after a “killer” concept opens the market or is constant change the more likely pattern? Are the key success factors of commercial microfinance generalizable across geographical boundaries and cultures or are they location-specific? Is commercial microfinance a contributor or a detractor in the fight against global poverty?


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Appeared in

Sector: Microcredit
Region: East Africa Caribbean, Central America, South America South Asia, Southeast Asia