Microfinance and financial inclusion: Challenges and opportunities

Abstract

Lifting the poor from poverty through financial and social inclusion is the ultimate target and raison d'etre of microfinance. As the most recent literature has recognized, microfinance institutions have economically worked well in operating microcredit, but the aim of raising the living standard of their indigent clients has not been generally met. The expected encouragement of entrepreneurship from microcredit is still not detected in the empirical data, let alone women's social integration in working activities. The articles collected in this thematic issue bring new empirical elements of discussion pointing to many aspects of the social divides and the inequalities that plague the emerging countries. This overview article recalls the main questions that are still open and the framework of topics discussed in this thematic issue.

Are interest rate caps a relevant tool to cool down overheating microfinance markets?

“…Many academics, governments, investors, and development actors held very high hopes about microfinance as the industry emerged. Since then, however, it has been much more criticized (Milana & Ashta, 2020). While some scholars have argued that its promises are not always met (Weiss & Montgomery, 2005), ethical issues have also tarnished the industry's reputation (Hudon & Sandberg, 2013).…”

Cryptocurrencies for Microfinance

“…In this arena, there are indications of new technologies, such as mutual support systems, interdependent credit systems, village savings, credit banks, and credit systems for microenterprises (Jawadi, Jawadi, & Dechamps, 2010;Khavul, 2010). In all of these, the role of technological innovations in enabling new means of performing transactions, monitoring customers, and contributing to microfinance is highlighted (Milana & Ashta, 2020;Singh & Padhi, 2015).…”

“…As in the banking sector, the microfinance sector is impacted by technological changes, and these changes directly contribute to the ability to reach out and achieve the win-win situation (Milana & Ashta, 2020;Singh & Padhi, 2015). Some of these technologies are related to the development of fintechs (Liu et al, 2020) -including e-banking, apps, and mobile payment -that are already being used by MFIs (Elliot et al, 2018;Jawadi et al, 2010).…”

“…Based on technology, it is possible to increase the number of clients, monitor them to reduce the asymmetry of information, and provide credit through digital means, thus reducing the associated costs. In this context, new technologies have been researched, both in the banking sector in general and in the context of microfinance (Milana & Ashta, 2020). For the purpose of this project, the potential of blockchain and cryptocurrencies as tools that can expand the capacity of MFIs to meet their goals is highlighted (Liu, Li, & Wang, 2020;Siqueira, Honig, Mariano, & Moraes, 2020).…”

Can behavioral biases improve the financial capability of microfinance clients in the tribal states of India?

“…The national household survey in 2003 revealed that only 27% of the households were indebted to formal sources (NSSO, 2006). Low‐income households claim that accessing credit from formal sources is too expensive (Milana & Ashta, 2020). Therefore, they continue to access credit from informal moneylenders for their consumption needs as, here, the process of accessing credit is more straightforward and does not involve nonprice barriers and transaction costs (Parekh & Ashta, 2018).…”