How do microfinance institutions balance social impact and financial performance, isn’t this a contradiction?
Bernd Balkenhol: Even before the crisis it had become clear that not all MFIs could automatically reach financial sustainability after a few years. In some market configurations the costs for delivering small amounts of credit to remote villages are exorbitant and cannot be loaded onto the client. A second factor is the growing competition amongst MFIs that have slightly different priorities. It has been observed that very commercially operating MFI leave no choice to competing more socially oriented MFIs to align their offer of services, which means cutting down on services too costly to deliver, even if they respond to a need. The crisis and the growing involvement of public authorities in financial markets led also to a reassessment of how much market and how much policy is needed to ensure a fair distribution of financial services. The mainstream has arrived at the consensus that some promotion of micro-finance is necessary, but that it should use incentive-based, smart public poli
