From Microfinance to Financial Inclusion: Reflections on 20 Years

2015 marks a good year for financial inclusion. At the IMF/World Bank spring meetings, several key actors, including the World Bank itself, committed to universal financial access for one billion people by 2020. Later, 193 member countries at the UN General Assembly endorsed the Sustainable Development Goals, with financial inclusion being incorporated into those goals. As the old ad used to say, “We’ve come a long way, baby.”

I have had the privilege of working in microfinance and financial inclusion for the past 20 years. My first exposure occurred while at Citibank when I traveled with ACCION to visit its microfinance operations in Argentina and Paraguay. That trip, along with other experiences, compelled me to leave corporate banking for microfinance.

Since then I’ve worked at a microfinance network (Women’s World Banking), a microfinance investment fund (Blue Orchard Finance), and now a donor (The MasterCard Foundation) which funds financial inclusion programs. This has allowed me to experience the evolution of microfinance to financial inclusion from different perspectives.

These people fish at the water's edge with a net
These people fish at the water's edge with a net. Photo by Phuc Ngo Quang.

In my view, there have been eight “big developments “in the last 20 years:

Overall, these developments have been good for clients in that they have helped expand the range of financial service providers, increased the number of products and services, improved access to hundreds of millions of people, identified the need for client protection and transparency and brought financial inclusion into the development mainstream. We need to do more, however, and it’s my hope that in the next 20 years, if not sooner, we can truly achieve full financial inclusion.

Central to this is a better understanding of what clients need and how financial services can be made available to them in ways that align with how they live their lives. This calls for paradigm shifts and approaches that put clients at the center of financial inclusion.

The MasterCard Foundation follows this approach. We have funded research and projects that focus on client centricity, the central theme of our annual Symposium on Financial Inclusion. This year, our key topics focus on client-centered leadership and organizational culture, the client experience and the business case for client centricity. Speakers will represent telecoms, consumer goods companies, fintech firms, microfinance institutions, commercial banks, and insurance companies. We also award a prize to a developing country financial services provider for being best at client centricity.

We believe that by building this larger community, which shares best practices and challenges, client centricity will become embedded in the way these organizations work and create a broader demonstration effect. Clients will not only access services but use them continuously and effectively to improve their lives.

CGAP has been at the forefront of many of these developments over the past 20 years and has also invested heavily in client-centric work. It has partnered with us in pilot projects, investing in new research and investigating the business case.

Through it all, we have come to know that financial inclusion is not an end in itself. Rather, it’s a critical factor for enabling people to access better economic opportunities and improve their lives. The evidence is clear:

  • Financial services have a positive impact on a variety of microeconomic indicators, including self-employment, business activities, household consumption and well-being;
  • There is a growing body of evidence (i.e., 31 randomized evaluations) about the beneficial economic impact of using savings, credit, insurance and payments;
  • Savings help poor households manage cash flow spikes, smooth consumption, and build working capital. Access to formal savings options can boost household welfare;
  • Micro-insurance can be an important mechanism for mitigating risk, especially for smallholder farmers; and
  • Mobile money reduces household transaction costs and seems to improve their ability to share risk.

Today, globally and in Africa, we see examples of virtual banks that clients can access through mobile phones at lower cost, something unthinkable 20 years ago. Technology itself is addressing the age-old problem of account inactivity; look at Juntos Global, which uses SMS to engage with clients digitally and can increase account activity by 33 percent and average balance sizes by 50 percent.

Would we have envisioned this 20 years ago? Almost certainly not. That’s why I am as optimistic for the next 20 years as I am proud of all that we’ve achieved over the last two decades.


16 November 2015 Submitted by Ed Jimenez (not verified)

I think another positive development the last two decades was the proactive stance of some financial regulators to 'think beyond the regulatory box' to support the growth of Microfinance and Financial Inclusion, e.g., proportionate regulation, issuance of e-money, financial inclusion as part of concerns of regulators together with financial stability,

18 November 2015 Submitted by Abhishek Lahiri (not verified)

Well chronological take on FI evolution. one thing I must add as well, remittance (domestic or international) has been a key driver of growth on m banking side. Agent network models will be one of the bedrock of innovations in years to come. Annes , the massive SHG bank linkage program of NABARD in India (supported by giz) has bee at the forefront too on FI campaign linking 7 million SHGs (some 7000000 members) with a bank. In next twenty years, better coordination between donors based on their strengths and granualar focus on 'real term impacts' should guide the FI evolutionary philosophy going ahead

20 November 2015 Submitted by Tom Sanderson (not verified)

Thank you Ann for the great overview. Here in the UK we have reflected the growth, depth and breadth of the sector by changing the name of the UK Microfinance Club into the Financial Inclusion Forum. The Club was launched during the UN Year of Microcredit (2005) and after ten years we felt it important to make this transition in recognition of the maturity and wider scope of the sector. Who knows what we shall be called in 2025? Maybe by then, the issue will be totally sorted and we won't be needed. Let's hope so!

23 December 2015 Submitted by Christopher Musoke (not verified)

Definitely over the last 20 years practitioners have stopped pushing products to clients and are now interested in what are the needs, preferences and capacities of clients as they design products. Looking into the crystal ball, what 3 significant developments do you see in the next 10 years Ann?

16 May 2016 Submitted by Jeffrey Ashe (not verified)


Thank you for your excellent summary. Well 20 years takes us back to 1996, the year before the first MicroCredit Summit. We need to go back to 1981 when all this first reached public awareness and Accion started it first solidarity group lending program in the Dominican Republic using a methodology lifted from a Salvadorian credit union federation. It was this big idea along with Yunus' similar model developed in the 70s that got this movement underway. Looking at the past twenty years, other than the commercialization of microfinance that got underway in 1992 with BancoSol in Bolivia (and the RCT work that brought us back to earth), the biggest developments were mobile money that reached the level of public awareness in 2009 and Savings Groups that began to significantly scale up in 2008 with funding from Gates. These most recent spins on the financial inclusion could hardly be more different in their approach - mobile money, high tech movement of money through cell phones, and Savings Groups building on long standing traditions of revolving savings circles that exist worldwide. Both of these approaches are exceedingly low cost.Mobile money is sustainable in that the providers earn a profit. Savings Groups are sustainable because groups continue to function long after the NGOs that promoted them has left and spread virally from peer to peer reducing costs two to three fold. These tools and institutional microfinance are becoming a part of a growing "portfolio" of useful tools that the poor to manage their finances. For more on Savings Groups see and For one who has been in this business since the beginning it has been quite a ride.

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