The world of finance may seem an unlikely place to find good news these days, but there?s one area of banking that?s a certified bright spot: microfinance.
“But banks are now seeing how saturated the historically profitable segments are, and how many banks are competing for the same pool of these customers,? Semenchuk said. That?s why his section of Citigroup is focusing on reaching out to a new?and very large?group of potential customers. One outreach initiative was the bank?s sponsorship of the Changemakers Banking on Social Change competition.
“Not only is this a business issue for us, it’s really a broader social and economic opportunity that the financial services industry must address,” said Semenchuck.
The world’s poorest people, it turns out, can be a safer investment in these troubled financial times. Microfinance lending has avoided the temptation to loosen credit regulations that helped create the current financial crisis, and microcredit repayment rates remain very high.
Yunus?s Grameen Bank in Bangladesh has seen the fruits of opening banking to the bottom of the pyramid. Grameen’s borrowers, 97 percent of whom are women and mostly illiterate, have helped make the bank profitable by maintaining an incredible 98 percent loan repayment rate?a feat most traditional banks would envy. The bank currently boasts more than 2,500 branches in nearly 84,000 Bangladeshi villages.
That is definitely some good news for a change.
The Changemakers community is deeply committed to serving the bottom of the pyramid. Check out these winning ideas from the Banking on Social Change competition:
- Fundaci?n Pro Vivienda Social, Argentina: Using a community-modeled financing system, this group helps low income rural residents get access to utilities and basic services by lowering costs and extending power lines and other infrastructure.
Sampoorna Suraksha, India:
This program, run by Sri Kshetra Dharmasthala Rural Development Project (SKDRDP), makes health care affordable for the poor by providing them with medical coverage without destroying their savings or forcing them to borrow at steep rates.
Pragathi Bandhu, India:
Also a project of SKDRDP, this initiative unites coalitions of small farmers to share their ideas and create a collective for their land and talents to reach better economies of scale.
“Most bankers have never believed that banks could serve the poor and the emerging middle-class in a profitable way,” said Jeff Semenchuk, Citigroup’s Executive Vice President & head of Growth Ventures and Innovations.