Description of the Field
Microfinance is a term used to describe financial services that suit low-income individuals, households, and communities. These services are offered by a variety of providers in order to promote economic development and alleviate poverty. When families and individuals lack access to formal financial services and lack collateral or salaries to qualify for traditional loans and other financial services, microfinance institutions (MFIs) may intervene with non-traditional lending tools.i The term "microfinance" stems from the fact that people receive services on a small scale. They may apply for and receive small loans and/or they may open small savings accounts with small deposits.ii Microfinancial institutions tend to use tools that have been developed over the last few decades: group lending and liability, pre-loan savings requirements, gradually-increasing loan sizes, and an implicit guarantee of ready access to future loans if present loans are repaid fully and promptly.
Microfinance strives to deliver these financial resources and guidance so that poor people and communities can become independent and sustain their independence. Along with start-up business loans, microfinance organizations may also offer savings plans, insurance, and payment transfers.iii
Microfinance institutions supply low-income households with quality and affordable financial services from a variety of retail providers on a stable and permanent basis. The goal is to help low-income people become financially independent by making money, perhaps through self-employment. This income allows them to build assets and protect against future risks.
Microfinance is effective because services are provided incrementally, so that low-income families and individuals can afford them. For example, a micro-loan may help families start a small enterprise such as a farming operation.iii
The financial needs of families who live in poverty can drastically change over time. This is why the services and products provided by MFIs, and the MFIs themselves, are so diverse.i MFIs can be small nonprofits or large commercial banks. They may be funded by philanthropists, loans, grants, local banks, or government entities.iv Many MFIs operate in the United States; and many are active in developing countries.ii Many microfinance volunteer organizations also provide these services, domestically and abroad.
The history of microfinance dates back to the 1970s when social entrepreneurs began to make contributions to financially unstable families.v These entrepreneurs showed that if the working poor received loans, and if participants followed a microfinance model, then social returns could be high and worthwhile.
Originally the microfinance field consisted of non-governmental organizations (NGOs) and microfinance banks with the social aim of alleviating poverty. Now, the marketplace has evolved, and certain microfinance institutions are becoming for-profits. This gives them greater market reach so they can better sustain the institutions.v For example, a nonprofit MFI may merge with a consumer finance company such as GE Capital. This merger reflects the varied financial interests of the marketplacev and broadens the microfinance field to include a wider range of clients and resources.
On the Job
Jobs in microfinance will vary. For those who are working for MFIs in developing countries, or are volunteering abroad, the work environment will require one-on-one interactions with clients in order to better grasp clients’ standards of living and how they budget time and money. Those who are first entering the field may want to volunteer with development agencies to gain experience. Some volunteer organizations help local banks and credit unions in impoverished communities establish policies and marketing tools to reach community members. This requires communication skills, an interest in community-building, an understanding of basic banking, and a comfort level and interest in working at the grass-roots in developing countries. For those who continue in the field, the next rung on the career ladder, after data-gathering, may be data-analysis. This work may take place "in-country" or elsewhere. Other jobs may include developing the technology to communicate information and make that information easily accessible.
Professionals in development also work in teams to cultivate ideas and create appropriate financial policies for the communities they serve. Working in groups will be an integral part of the daily activities in a microfinance job. Entry level analysts may work with a team of project managers to prepare a project: manage events and meeting logistics, prepare training materials, or "deliverables" for clients, and enter and analyze data.vi Entry-level analysts may also interview clients and conduct focus groups as part of their research.vi
Microfinance differs from many fields in that it lacks a structured hiring process or hierarchical career path.i Microfinance offers many opportunities that suit a variety of interests. Those who enter the field can construct a career path around their passion, whether that lies in the nonprofit world, in community-based development institutions, or within the insurance or credit card industries.i Required skillsets for microfinance jobs will vary depending on the area of interest.
Because the microfinance industry is so broad, entry-level jobs may be found in various industries such as finance, policy-making, or development. Bankers are not the only professionals who work within the microfinance industry. Many employment opportunities go to recent graduates or those with varied job backgrounds who later enter the field. Other job titles include product designers, program assistants, financial analysts, microfinance risk management analysts and consultants, accountants, managers, and experts in technology, mobile money, and marketing.vii
Those interested in working for financial institutions, investors, or microfinance organizations need work experience, financial knowledge and skills, and networking abilities with traditional financial institutions such as commercial banks.i Positions would include financial analysts and advisors or micro-insurance managers. Those who are more interested in research, market analysis, or development policy should hone those skills by working on specific microfinance projects in developing communities.i In addition to traditional finance and accounting fields, there are other microfinance opportunities in software development, marketing, and communications.viii Students entering microfinance are encouraged to volunteer or intern abroad to understand the types of communities they will serve, the small businesses they will assist, and the economic development industry in general.
The microfinance industry blends economic and humanitarian efforts to help low-income communities. The demand for microfinance work is great in impoverished countries. According to a report by responsAbility Investments AG, the global microfinance industry grew by 20% in 2012 and is predicted to maintain this growth rate in 2013. The International Monetary Fund (IMF) reports that average GDP growth will increase from 4.7% to 6.2% in the fifteen most important microfinance markets,ix indicating microfinance's potential strong effects on developing economies. Microfinance markets in Africa, South Asia, and East Asia have also grown.ix
MFIs operate in more than 100 countries and serve about 100 million clients, a stabilizing increase toward recovered growth after the most recent financial crisis.i Total assets of microfinance funds reached $7.5 billion in 2013. Microfinance institutions, globally, held $131 billion in assets in 2013 with over 205 million clients served.x Assessed potential is 2.5 billion microfinance clients. The demand for finance professionals with social science knowledge and cultural understanding is on the rise as MFIs grow to meet the global demand after the financial crisis.i
Qualifications Necessary to Enter the Field
Because microfinance requires considerable knowledge and experience, graduates need a bachelor’s degree in a related field – finance, economics, or business – to obtain entry level jobs. Although a bachelor’s degree is the minimum requirement, it is recommended that graduates have at least two years of research analysis and data collection experience to obtain such positions.vi Many organizations offer advancement opportunities but may require a graduate degree. Typical graduate degrees include a Master’s Degree in International Affairs, Public Policy, and Business Administration. Undergraduate research experience may position graduates for opportunities ordinarily reserved for students with graduate degrees.
Those entering the field should have marketing and communications experiences that are related to financial services.i Candidates who are successful in microfinance should also demonstrate a passion for building businesses using limited resources. They also should possess qualitative, analytical, communication, leadership, and strategic planning skills. Working abroad for an MFI also often requires fluency in a foreign language. For those interested in entering the investment or banking part of microfinance, an MBA degree is recommended.
Sample Group of Employers
Acumen Fund - http://www.acumen.org
Ashoka - http://www.ashoka.org
BRAC - http://www.brac.net
CARE - http://www.care.org
Citigroup Microfinance- http://www.citigroup.com/citi/microfinance/
Consultative Group to Assist the Poor- http://www.cgap.org
Finca International- http://www.finca.org
Grameen Foundation- http://www.grameenfoundation.org
Women’s World Banking- https://www.womensworldbanking.org/
World Bank (International Finance Corporation, Financial Inclusion Practice Group, and other teams internally) – http://www.worldbank.org/
Selected U.Va. Organizations/CIOS
For a full list of organizations at UVA, please see: https://atuva.student.virginia.edu/Organizations
Alpha Kappa Psi
Global Business Brigades (GBB)
Global Markets Group at the McIntire School of Commerce (GMG)
Student Entrepreneurs for Economic Development (SEED)
Sample UVA Career Programs
Finance for All Majors
Spring Finance Night
Resources for Additional Information
- Accion - https://www.accion.org/what-we-do
- Kiva: About Microfinance - http://www.kiva.org/about/microfinance/
- Global Brigades Volunteer Organization - http://www.globalbrigades.org/microfinance-brigades-faq
- Microfinance Market Outlook 2012: Persistent Demand Provides for Stable Returns http://www.responsability.com/domains/responsability_ch/data/free_docs/rA_Microfinance_Market_Outlook_2012_en.pdf
- Microfinance Focus Magazine - http://www.microfinancefocus.com/
- About Microfinance: A Portal to the World of Microfinance –http://www.aboutmicrofinance.com/microfinance-volunteers
- Vault Career Guide to Commercial Banking Jobs
- Vault Career Guide to Investment Banking
- Microfinance Professionals
- Microfinance Focus
- Microfinance Group
I Columbia University, School of International and Public Affairs, “Career Opportunities in Microfinance and Development Finance”
iii http://bx.businessweek.com/microfinance/jobs/ (Link no longer active)
iv Union College Career Center, “Microfinance Internship and Job Links” http://www.union.edu/offices/career/_documents/microfinance-internship-and-job-links1.pdf