Edited by Luisa Anderloni, David T. Llewellyn and Reinhard H. Schmidt
Chapter 3: Microfinance, Innovations and Commercialisation
3. Microﬁnance, innovations and commercialisation Reinhard H. Schmidt THE MOTIVATION AND THE STRUCTURE OF THE CHAPTER 1 The Nobel Peace Prize of 2006 was awarded to the Grameen Bank in Bangladesh and its founder Professor Mohammad Yunus. What Yunus and his Grameen Bank – as well as a number of other microﬁnance institutions (MFIs) and their leaders – have achieved over the past 30 years not only deserves great respect for its political ambitions and its social and economic eﬀects, but also has to be regarded as one of the most important and most interesting innovations in ﬁnance. Its hallmark is making credit and other ﬁnancial services available to people who have so far not had access to formal ﬁnance. To use the expression coined by J.D. Von Pischke, these microﬁnance pioneers succeeded in ‘shifting the frontier of ﬁnance’ to territories into which formal ﬁnancial institutions had so far not ventured to go.1 This chapter discusses microﬁnance as a ﬁnancial innovation. A common classiﬁcation distinguishes between product innovations, that is, doing new things, and process innovations, that is, doing certain things in a way not known or at least not used before. Microﬁnance as we know it today is the outcome of a combination of product and process innovations. Its most visible part is a product innovation: ﬁnance for the poor and especially for poor self-employed people.2 However, a rapid succession of process innovations has made it possible for small loans to be oﬀered...
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