Innovations in Microfinance Funding

Abstract

Microfinance institutions (MFIs) have been making microfinance loans for several decades now, and their impact on poverty alleviation and living standards for women has been well documented. A challenge for MFIs lies in securing adequate and sustainable funding. A growing opportunity for MFIs is the issuance of microfinance backed bonds. These revolutionary instruments allow investors to reap competitive financial returns from social entrepreneurship, while alleviating poverty. In order to achieve scalability and wider impact as well as greater efficiency, MFIs need to engage in creative innovation in terms of financial instruments – a microfinance impact bond (MIB) is one such innovation.