Nowadays, Microfinance has proven to be a fast growing, socially responsible and financially sound sector. Some MFIs reach already millions of clients and have become an important part of the financial sector of their countries. However, it is estimated that one billion people still lack access to basic financial services.
Microfinance is still far from reaching its potential and this is mainly due to a lack of funding resources. In many cases, MFIs are not authorized to take deposits and do not have access to local capital markets. Governments and private donors have financed the industry, but they have been unable to keep up with the rapid growth of the MFIs’ portfolios. To date, local capital markets have often been unable to believe that MFIs are creditworthy institutions. This has been leaving many MFIs with chronically restricted funding, meaning that many poor micro-entrepreneurs could not access their services.
By end of 2007, it has been estimated that only 20% of the target population has been reached and only 10% of the potential credit volume has been exploited. E.g. in India the industry is expected to reach about 70 million clients with a loan volume of 15 billion USD just in 5 years.
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