Microfinance and Innovation: Are we reinventing the Wheel?

I had an opportunity to co-author with my ex supervisor Professor Ian Miles to write an opinion in the world magazine MicrofinanceInsights. The piece appears in the latest edition (Vol 15, Nov/Dec 2009). I quote the editorial’s comment:

Innovation: Are we Reinventing the Wheel?

In this issue, we look at different innovations—product, technology, and financial—that are adding value and efficiency to the sector. In our Commentary, Ian Miles and Yanuar Nugroho of the University of Manchester, argue that microfinance is now poised to bridge the gap between the privileged and the bottom of the pyramid, with the help of innovations that bear no resemblance to the Wall Street machinations that helped bring the global economy to its knees. In our cover story, Stephen Hodgson of Redport International and Yana Watson of Dalberg Global Development Advisors, question the nature of innovation that has taken place in microfinance to date; cite examples from the annals of financial history that could work well when applied to microfinance; and conclude that the sector might be better served if it adopts models that have been tried and tested in other spheres of finance. The issue brims with examples of innovations that work—from mobile technology in India to financial education for Mongolian teenagers to ATM-style kiosks in Georgia—and ones that don’t, such as the Business Correspondent system, which has faltered in India. In this issue’s Survey, our team polled 180 microfinance institutions about how Information & Communication Technology has influenced their work. You will also find the results of a Reader Survey we conducted in September to gauge what our audience thinks of Microfinance Insights so we can tailor the content to suit their preferences.