The Past and Future of Innovations in Microfinance

Abstract

The microfinance industry carries every sign of an innovation in its take-off phase. The characteristic aspects of the microfinance innovation were developed in the 1970-1980’s, thirty years later the industry experiences a phenomenal growth rate, and it has diffused to most developing countries in the world. This review chapter looks at microfinance as an entrepreneurial activity in its own right, contributing to the development of small and medium-sized firms in developing countries. We trace the innovations in microfinance, for instance group lending, loans to women, and their financing, and we ask whether the business model implied is sustainable once diffusion has gone far, competition enters, and customers enter higher income levels.