Can Financial Services for the Poor Be Profitable?
Microfinance, or financial services for the poor, can be profitable. The November 2001 issue of the MicroBanking Bulletin includes data from 62 self-sufficient MFIs. The average return on assets for this group is 5.5%, which compares favorably to commercial-bank returns. Indeed, there are grounds for hope that microfinance can become attractive to mainstream retail bankers. At the same time, some worry that an excessive concern for profit in microfinance will lead MFIs away from poor clients to serve better-off clients who want larger loans. It is true that programs serving very poor clients are somewhat less profitable than those reaching better-off clients, but this may say more about managers’ objectives than an inherent conflict between serving the very poor and profitability. MFIs serving the very poor are showing rapid financial improvement. Microfinance programs like Bangladesh Rural Advancement Committee and ASA in Bangladesh have already demonstrated that very poor clients can
