Microfinance Barometer 2017: global trends of the sector...

The 8th edition of the Barometer offers an in-depth special report on the synergies between microfinance and impact investing.

The situation resembles a crossroads, with a mature microfinance sector on the one hand, and impact-investing opportunities that still need to be defined on the other. A group of 200 investors sharing their data with the Global Impact Investing Network said they invested roughly 60% of their assets in microfinance and other financial services in 2016. That's far ahead of the impact-investing sectors, such as agriculture, energy and health, all of which were below 10%.

But things could change. The strategy of investors is increasingly influenced by the 17 SDGs, which aim to reduce poverty and protect the environment. The maturity of the microfinance sector is also pushing investors to diversify, as are technological advances in developing countries, which give a boost to projects financed by impact investing.

The situation raises fundamental questions that everyone is trying to answer: can microfinance be a source of inspiration for impact investing? How can we measure an investment's social performance? What challenges will microfinance face in terms of growth in the countries where it is used? Jean-Michel Servet, honorary professor at the Graduate Institute of International and Development Studies, addresses all of these issues. He looks at the close relationship between impact investing and microfinance, the future challenges for these sectors-which are based on synergies with public action-and how to measure a project's actual impact.

A number of global trends can be seen in specific cases. The first example is Banco da Familia, a Brazilian MFI. According to a study funded by BNP Paribas, 79% of Banco da Familia's customers increased their income between the first and last loan contracted with the organisation. That's a big achievement, especially considering that 87% of the customers said their standard of living improved.

Another good example is M-Kopa Solar, a Kenyan social enterprise whose business model is based on the principle of 'pay as you go'. The company offers customers solar panels, lamps, phone chargers and radios for just 50 cents. It has roughly 250,000 outstanding loans, 92% of which are in a positive situation. It also raised nearly $7 million between 2015 and 2016.

The boundary between impact investing and microfinance is getting thinner. And this phenomenon is giving rise to new opportunities in both fields.