Growing microfinance: Going beyond conventional banking

MIcrofinance, though a successful finance tool, continues to face challenges in Africa. Photo by: Rachel Strohm / CC BY-NC-SA

Microfinance is now a widely accepted tool that has a significant role to play in the eradication of poverty. The success of Grameen Bank and several other entities has been a catalyst for the microfinance industry’s growth worldwide.

Even though this funding tool is growing at a substantial rate in Africa, it faces many challenges. The Microfinance Information Exchange reports that operating expenses in sub-Saharan Africa remain among the highest in the world. The report also says returns for microfinance in the region are falling and portfolio-at-risk is rising. High operating expenses are particularly common where skilled labor is scarce and labor costs are rapidly increasing.

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About the author

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    Jennifer Reimer

    After completing her MBA, Jennifer Reimer spent 10 years in the consumer goods industry. Having dreamt for years of pursuing a career in social development, she moved to South Africa in March 2009 and worked with Harvard University on a project that investigated an innovative method of scoring SME and microfinance applicants. Jennifer is currently contracted to Nestle South Africa, where she works on sales and BOP projects.