From credit to inclusive finance

Inclusive finance incorporates access to an array of financial services. In the past, the focus was mainly on microcredit; providing small loans to help the underprivileged improve their standard of living. Most of the people living in poverty are self-employed and the first microloans were targeting these micro-entrepreneurs. However, soon it became clear that credit alone was not sufficient. There was a big demand for more diversified financial products and services offered by microfinance institutions (MFIs) such as saving and insurance. Therefore, we no longer speak of only microcredit but of microfinance.

By responding to the need of the client – offering the right product to the right client – MFIs broaden their market share, reduce their own risk and grow responsibly.

Over time, it became apparent that there was still a big gap in the financial landscape of developing countries. Small and Medium Enterprises (SMEs) were underrepresented as their portfolios were too small for the formal banking industry but too big for MFIs to handle (see the NpM Microfinance in Practice video's). However, in every economy SMEs are an important stimulator of economic development and in creating jobs. Because the need for access to finance applies not only for micro-entrepreneurs but also for other market segments, we now speak of inclusive finance.