Game Changers or a Whole New Ballgame?

Piggy-backing off one of my colleague Dan's posts at the Microfinance India Conference, this short article by Nancy Barry discusses the need for game changers within India's microfinance landscape. Her argument is that, in an effort scale-out and widen financial inclusion, most Indian microfinance institutions have become loan dispensers that spit out only small amounts of credit; woefully short of the financial (and non-financial) services needed by the poor to truly build assets, value chains and livelihoods. She cites BASIX and SEWA Bank as the gold standard of microfinance models for their emphasis on livelihoods etc.

While I agree that many MFIs hinge their services around small disbursements of credit, my hunch is that India is also the world's biggest incubation tank for different types of financial services (beyond credit), even in spite of the regulatory hiccup regarding savings. From weather insurance to mutual funds, there seems to be innovative microfinance products (including microfinance 'plus') at every turn.

Ms. Barry's argument also echoes the remarks by Professor Murdoch at the recent Innovations in Poverty Action wherein he questioned,

Why are microbusinesses not growing? One of the undeniably truths about microfinance that is obscured by the marketing narrative is that very very few of the businesses started by borrowers ever grow to employ anyone outside the immediate family of the borrower. This is a problem because if the businesses are not growing, there is a hard ceiling on how much both family income can rise and how much community-level impact can be achieved.

I think, as Ms. Barry seems to imply, that this phenomenon is not simply a matter of insufficient credit but coupled by larger issues such as lack of access to supply chains, lack of business training etc. But would we need to change the entire ballgame to help micro-entrepreneurs go from micro to meso? Could we call this microfinance?