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Do MFIs aim to help the poor or make a profit?
They want to do both: most MFIs have a ‘double bottom line’, that is, their main aim is to meet social objectives such as reducing poverty or empowering women, which they attempt to do while maintaining financial viability. Probably microfinance services that target very poor clients may be less profitable than those which target the slightly better off since they may have higher transactions costs providing very small loans to more isolated borrowers. Hence there is a concern that an excessive concern for profit or indeed sustainability in providing microfinance services will result in MFIs moving away from very poor clients to serve those who are less poor and who want slightly larger loans.
There are cases where microfinance can not be made profitable, for example, where potential clients are extremely poor and risk-averse or live in remote areas with very low population densities. In such settings, microfinance may require continuing subsidies or it may be better to promote alternative financial solutions, such as local savings and credit associations that are managed by the local community themselves.
