microfinance: transparent solutions

India is home to one-third of the world’s poor. By 2030, an estimated 590 million people will live in its cities—an increase of 300 million residents in fewer than 30 years. It’s a complex environment that breeds complex problems: high rates of school enrollment at low quality schools; massive slums that lack basic sanitation and infrastructure; lack of access to reputable financial institutions.

On its own, philanthropy can only do so much to combat those challenges. But in combination with reputable social-enterprise solutions such as microfinance—a key strategic focus of our work in India—there’s enormous potential to catalyze sustainable, systemic change.

2010 represented a critical juncture in our microfinance work. In India, we worked with urban MFIs to structure and manage scale, and to introduce technology-enabled cost efficiencies, product diversification and customer protections. We also supported innovative, early-stage institutions focused on affordable urban housing solutions (a previously neglected space.)

And at the level of infrastructure, we helped promote and drive adoption of standardized tools and metrics. We supported work to enable pricing transparency in Indian microfinance; in the wake of that effort, *MFIs representing approximately 77 percent of India’s active borrowers and 80 percent of the nation’s total estimated gross loan portfolio1 began routinely reporting on their interest rates. Meanwhile, at the global level, we spearheaded the integration of industry-standard social performance indicators with the Microfinance Information Exchange’s widely used database of financial and operating indicators. Our goals are to ensure increased industry accountability, transparency and a truer measure of the ways MFIs work to impact the lives of the clientele they serve.

We understand the risk inherent in market-based solutions, but we don’t believe risk alone is a reason to walk away. It’s a reason to redouble our efforts and to make smart, measured choices that will help ensure that, as the microfinance sector scales both in India and globally, it remains rooted in the core principles of sustainability, transparency and serving the social good.

Geeta Goel, Microfinance

1 These market share figures are estimates based primarily on data from the MIX market. As the true scale of the Indian microfinance market is unknown, these figures are approximations.