Commercial Banks and Microfinance

Poverty is one of the few challenges every country in the world has to face. Despite the difficulties change involves, there are solutions: microfinance is one of them, one that is viable and that creates self-sustaining individuals, hence reducing dependency on aid. Starting with the Grameen Bank founded by Mohammad Yunus in the 1970s, microfinance represented a method of lending that was to be tailored specifically to the world’s poorest populations. Today microfinance is entering a new phase: commercialization, which may represent an extension of the formal financial sector and a market solution to the mitigation of poverty. In order to allow for this interest, microfinance needs to become a structured, transparent and regulated industry where everyone may find a position. This paper will argue why commercial banks are best able to assist the goals of microfinance, how they can partake in this field and respond to its challenges. While striving to answer the main economic and moral questions concerning the commercialization of microfinance, the study also analyzes a sample of commercial banks active in this field.