The Social Impact of Commercial Microfinance: Investment That Develops Entrepreneurs and Alleviates Poverty

This paper discusses the growing social relevance of commercially funded microfinance and its impact in developing communities. Microfinance attracts donors and investors because of its proven ability to provide social returns, efficient use of capital and the potential for sustainability.

The paper compares the social returns of microfinance to those of other socially responsible investments. It differentiates between the social impact of microfinance from publicly funded sources and that from private, commercial sources. Unlike measures for financial benefits, those for social benefits have become standardized or universal. Donors and practitioners currently use a variety of methods like scorecards, indexes and anecdotal evidence to measure social benefits.

Commercially funded microfinance brings people who were below the poverty line into the formal financial sector by introducing new financial products to the community. This will contribute to poverty alleviation and economic development. The paper concludes with a discussion of the double bottom line, stating that a clear social impact combined with a reasonable expectation of financial returns will sell commercial microfinance in the capital markets.