The Birth of the Microfinance Fund

Ethan Arpi — Wed, 23 Aug 2006 15:48:13 -0400

Next year microfinance celebrates its 30th birthday (Of course, that depends on who you ask). Beginning when Dr. Muhammad Yunus, an American trained economist from Bangladesh, experimented by lending money to 42 women so that they could buy bamboo for making and selling stools, microfinance has transformed throughout the decades, becoming a global industry and a pillar of international development. According to the Microcredit Summit Campaign, a whopping 92 million people have received microloans, a number that has attracted significant attention from more than just the do-gooders involved in international development. So it should have come as no surprise when The Wall Street Journal reported earlier this year that a new player has entered the arena of microfinance: the microfinance fund. Funding for microfinance has traditionally come from charities and government-aid organizations, the Journal notes. “Now, an increasing number of private funds are steering capital to microfinance -- and demanding a return, albeit a modest one in single digits, on their investments. By doing so, the funds hope to boost microfinance's reach and efficiency, while also drawing more capital from investors.”

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The Birth of the Microfinance Fund