The zeal for microcredit may have undermined the power of the larger microfinance movement, which involves the creation of financial services, beyond just loans, that are available to the poor. Financial services are like clean water and electricity — they are essential to leading a better life. Imagine if you didn’t have access to bank accounts, insurance or mortgages. Poor people need such services more than anyone, because in developing countries, poverty does not just mean low income, it means volatile income. The poor need to set aside money in times of plenty and draw it out in lean times. Financial services allow you to save for wedding expenses, borrow for funeral costs or insure for health care.
The industry should move away from its long-standing focus on credit, and experience shows that it can. Mature microfinance institutions in Indonesia, Bangladesh and Bolivia are doing at least as much deposit-taking as loan-making — good news for the poor, since it is much harder to get in trouble by saving too much than by borrowing too much. In Mexico, Compartamos Banco offers life insurance along with its loans and ranks among the country’s largest life insurers. And in Kenya, the mobile-phone-based money-transfer system M-Pesa now does more transactions then Western Union.