Global Poverty

Fintech in Microfinance: In Search of the High-Tech High-Touch Unicorn?

Fourth in our commentary series coming out of a workshop at Lehigh University’s Martindale Center on the future of microfinance.

First commentary is here; second here; third here, fourth here.

Center for Financial Inclusion Blog

> Posted by Todd A. Watkins, Paul DiLeo, Anna Kanze, and Ira Lieberman

Fintech is a shiny attractor for impact investors. Emerging financial technologies shimmer with disruptive potential for the delivery of a wide array of financial, educational, health, and social services for the poor. While microfinance still makes up a major share of impact investing portfolios, many investors appear to have moved on to fintech, the next wave of creative destruction. Rather than be toppled by it, microfinance institutions (MFIs) look to ride that wave too, to extend reach, reduce costs and prices, improve and deepen client services, and improve risk management.

Fintech, whether new digital services or proprietary software used to evaluate and underwrite credit, brings glittery potential for MFIs, no question. But in fairy tales unicorns glitter too. Are MFIs chasing something equally illusory? Microfinance has decades of success growing and strengthening a high-touch business model. As growth…

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1 reply »

  1. I enjoyed your high tech high touch unicorn post. A question that remains for me is why BoP financial customers appear to value high-touch banking channels over digital ones. Granted, the digital infrastructure still needs a lot of work and the digital divide does indeed play a role. But what about costs? It seems that for the customer, avoiding digital is still cheaper. For example, why pay mobile money, agent, or ATM fees (which can equate to a substantial percentage of a daily wage for low-income individuals) for simple deposit withdrawals when the alternative is typically still free (or at least cheaper)? MFIs may benefit from lower costs by going digital but do customers?


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