Financial inclusion forms an integral part of the Sustainable Development Goals set by the UN. With over 1.8 billion adults around the world lacking the access to basic financial services, there is a severe need in measures enabling the unbanked to access financial services.
Microlending is one of the crucial drivers of change in the quest for financial inclusion. By serving those at the bottom of the pyramid, microlending fills a significant gap in the financial services landscape of developing nations. Microlending enables underserved groups of the population, and micro-businesses — predominantly in the rural areas — to gain access to credit to meet their financial needs.
Microfinance institutions(MFIs), in particular, are driving the charge to extend credit to the underserved/unserved population across regions. Traditional financial institutions, with their focus on high-value, high-margin businesses, on the other hand, have always found it challenging to cater to the needs of individuals at the bottom of the pyramid. The small dollar amounts, high last mile costs, and lack of financial literacy among consumers, coupled with the round-the-clock presence of the local moneylenders, have always prevented banks from providing financial services to a large segment of the population in a meaningful manner. In 2017, banks catered to only 33% of the total number of borrowers for microlending globally.
MFIs, with higher penetration into the rural segment, play a crucial role in servicing those at the bottom of the pyramid with their feet-on-the-ground approach. While NBFCs and NGOs have traditionally been at the forefront of microlending, new-age FinTech startups are now using advanced technologies to create an enabling environment for these under- and un-banked clients. Be it Kenya, Philippines, India, Mongolia or any other unbanked-population-rich country, FinTech firms have initiated
