It seems just about every week, a journalist somewhere in the world will write a piece on microfinance and the effects the worldwide credit crisis will have on the sector. Most journalists and experts alike are optimistic that microfinance will weather the storm and could even be “the answer” to the international investment predicament we are slipping further and further into (find the article here: Raksin, Huffington Post). An article by Allianz’s James Tulloch, “Can Microfinance Beat the Credit Crunch?” presents one of the more realistic outlooks for microfinance in 2009. Though it strays from the common “nowhere but up!” optimism, it offers a silver lining to the crisis’ impact on microfinance worldwide;

The downturn could [force] MFIs to grow less aggressively and focus on consumer protection, transparency, and governance. “Are we building a “bubble” of over-indebtedness? If so, then a slowdown in growth will provide the opportunity to reconsider the basics of underwriting,” said Cecelia Beirne of MicroVest at the CGAP event.

There is no doubt that microfinance is a pretty resilient investment alternative, and the growth of MFIs (microfinance institutions) through the Asian and Latin American economic crises of the 1990’s and early 2000’s is an encouraging sign that microfinance may reside just below the economic current that can affect the regions of operation. Today, the sector has not been greatly affected by 2008’s volatility and economic decline. Though past performance is encouraging, it is a different sector today than it was three years ago, not to mention 10-15 years ago. In that period, microfinance investment, exposure, and commercialization has increased exponentially (with projections that at one time had predicted private investment in microfinance to increase from $2B USD to $20B USD by 2015; IAMFI). Let it be known that I, like the many that are optimistic that microfinance may even benefit from the credit crunch, are cut from the same cloth… we all want to microfinance to succeed in its efforts to alleviate poverty worldwide. I also know there are many out there, like myself, that think microfinance is so close to the tipping point of becoming a mainstream issue and investment avenue. This feeling can lead to a concern that the progress microfinance has made (and deserved) in recent years may take a serious hit because of the current crisis. I personally do not find this concern to be a very valid one. The concerns over the impact of the financial crisis can essentially be split into two camps; the financial concerns and the ideological concerns.

Financially speaking, I do believe funding will become more expensive and harder to find in 2009 (even though investment funds have heralded microfinance and healthcare as the two sectors with the most opportunity… seeing an opportunity and access to the capital to pursue that opportunity are two very different things). Realistically speaking, I think individual microfinance institutions will have considerable woes in 2009.  However, ideologically speaking, I do not believe microfinance will be hurt by the crisis, and in that regard, the progress and attention gained over the past few years will hardly dissipate (just seeing investment funds spotlighting microfinance on par with a sector like healthcare is something quite incredible). Financially speaking, investment in microfinance will likely focus more on the larger, less speculative, and less aggressive MFIs. This will pose serious problems for the majority of MFIs that are still in their nascent stages of operation. Ideologically speaking, the crisis hasn’t hurt people’s interest and advocacy for microfinance. October 2008 was quite possibly the most volatile and economically disruptive month in the US over the past 50 years. However, it is interesting to note that October 2008 was also the month that Kiva raised the most in a single month in the history of its operation to that point (which was then surpassed by November and December of 2008).

The financial concerns, though significant, and the continued ideological progress could turn out to be a microfinance idealist’s dream. 2009 could be a year in which the commercialization and over-aggressive growth of microfinance wane, but attention and interest grow… which would certainly make 2009 an interesting year for microfinance– 2009 could be the year that 2008 catches up to microfinance, but the “gathering clouds” may certainly have a “silver-lining.”

About J. Beshara

I was born and raised in the great state of Texas, and after university in North Carolina, I moved to work for an MFI called Kuyasa in Cape Town, South Africa (it's absolutely beautiful if you've never been!). I still live in Cape Town, but left Kuyasa to start, an online microlending pilot program that will launch later this year (we hope it makes the difference in the world that we think it can!). I am also one of the founders of, a news source for everything microfinance, and a co-founder of the 501(c)3, The Dvelo Fund, which gives grant funding to undergraduate students wishing to research developmental issues in the underdeveloped world (ie, give passionate students the firsthand experience that is often too costly to fund themselves). Though has shared some of our articles from The MiFi Report before, the official introduction was made through a lovely young lady named Kayla Villnow (of Esperanza, D.R.), and I have her to thank for the introduction to Jerry and Drew's great site! JJ Beshara