Best Microfinance Innovations in 2008

2008 was a big year for microfinance, and not just because it continued to grow in scope and recognition despite the financial downturn. It was also a great year for innovations and improvements. Here are a few of the best new developments in microfinance in 2008. If you disagree with me, or feel I’ve left something out, please add your own thoughts in the comments section.

1. DIRECT CORPORATE SUPPORT FOR MICROFINANCE

At least three Fortune 500 companies announced this year that they would make financial contributions to microfinance as a part of their corporate social responsibility programs. Green Mountain Coffee Roasters is working with Root Capital. Whole Foods is working with Unitus. And Mastercard is working with BRAC. These three alone represent hundreds of millions of dollars in new loan capital and MFI operating capital.

2. SOCIAL NETWORKING MEETS MICROFINANCE

Microfinance organizations, in their never ending quest to find new donors, lenders, or borrowers have tapped into the social networking functions of Web 2.0. Check out this search on twitter for microfinance. Or the Facebook pages for virtually every U.S. based MFI. Some organizations have gone so far as to build social networking into their own sites. Kiva’s Lending Teams are probably the most widely used. And if you aren’t already a member of one of the affinity groups on Linkedin or Yahoo Groups for microfinance, at least check it out.

3. THE SPREAD OF CASHLESS ECONOMIES (and we don’t mean barter)

Inexpensive, small, and reliable mobile phones are finally making mobile banking a reality.

4. GRAMEEN AMERICA

Sure there’s been microfinance in the US, but you can’t tell me you’re not excited about Grameen setting up its village banking model in the heart of our biggest city. Aside from drawing back the curtain on the poverty right here at home, running the Grameen experiment in the States will undoubtedly result in lessons for the entire domestic microfinance community.

5. USER GENERATED CONTENT ON MICROFINANCE SITES

Kiva is at it again, proving that standing still is actually going backwards. Kiva just introduced an “application development interface” or API at build.kiva.org. An API is a place where independent software developers can build neat new gizmos that, hopefully, will enhance the user’s experience on Kiva.org.

6. LENDING IN THE LOCAL CURRENCY

Finally, one of the least exciting but most important innovations of the last year is the effort by a number of leading microfinance investment vehicles to lend in the local currency. MFX Solutions is a consortium of MIVs, including FINCA, Global Partnerships, Unitus, and others. MFX will pool the financing and manage the currency transfers from dollars to the local currency. Formerly, the MFIs would have to borrow in dollars, meaning that any fluctuation in exchange rates during the life of the loan would be absorbed by the MFI. The transaction becomes less risky and so the MFI can charge a lower interest rate on the micro loans to its clients.