THE ORIGIN AND EVOLUTION OF MICROFINANCE

This article examines the process of origin and development of modern microfinance industry, historical context and evolution to the present stage, and its impact on the socio-economic life of poor and low-income people in developing countries. The majority of microfinance consumers are poor, low-income and rural residents, most of which are self-employed in informal sector. This category of costumers are naturally characterized by high degree of vulnerability and dependence towards external factors, which can very easily lead to a sharp decline in the yield and productivity of their micro businesses, resulting in the problems of creditworthiness and even bankruptcy. Unlike traditional approaches of managing private business where the primary goal is profit maximization and satisfying the owners' material interests, classical microfinance has the “Double Bottom Line” approach implying that it must have both - financial as well as social objectives. From early XXI there are number of “Triple Bottom Line” Microfinance Institutions integrating financial, social and environmental objectives in their business strategy. Microfinance, as part of the financial intermediation, has paved a long way from its initial stage to the modern business model. Its primary forms have been existed in many countries as an effective and reliable alternative to existing lending institutes. Beginning of the 90s is the next hallmark in the history of modern microfinance. For the first time ever, a microfinance NGO has been transformed into a commercial bank and allowed to take deposits from public (Bankosol in Bolivia, 1992). Many other NGOs followed this path of transformation. This period is also characterized by downscaling of commercial banks and their active penetration in microfinance market. Another important stage in microfinance was the year 2007 - the first and extremely successful initial public offering (Banco Compartamos, Mexico). The IPO of its stock was 13 times oversubscribed and raised $467 million in total. Along with the commercialization and transformation, some other interesting changes were also developed in microfinance during a recent decade, including technology and innovation. One of the good example is emerging of mobile banking system in Kenia (M-PESA) which was totally focused on microfinance clients and rural costumers. It should also be emphasized that in parallel of such successful growth and financial performance of the sector, the direction of social responsibility has been weakened and the original fundamental values of microfinance have been diminished (Mission drift). After commercialization, microfinance today in positioning more as an integral part of a profit-oriented financial market rather than effective instrument of combating poverty.