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.