ADB, the Consultative Group to Assist the Poor, and many other funding agencies have advocated the commercialization of microfinance, but there is no consensus on this in the broader microfinance community. Many promoters and practitioners have expressed fears that commercialization would shift microfinance institutions away from the poor, but it appears that such fears are not well supported by empirical evidence.
In general, if commercialization is to hurt the poor it has to move microfinance institutions away from serving poor clients, or result in poor quality products and services for them, or increase the prices of their products and services. Commercialization of microfinance does not necessarily lead to any of these outcomes. First, commercialization increases the ability of microfinance institutions to obtain funds from both semicommercial and commercial sources. Microfinance institutions that build their capital over time through commercial approaches have a greater ability to leverage funds in the market. More importantly, commercial approaches ensure that microfinance institutions become the more robust, permanent institutions that poor people need. Moreover, the efficiency gained by commercializing enables them to offer competitive prices and better quality products and services to their clients.
Empirical evidence shows that commercialization helps the poor. The Association for Social Advancement (ASA) in Bangladesh has a commercial approach to its operations and is one of the most efficient microfinance institutions in the world. It has a strong capital base, and its outreach grew from 1.08 million active borrowers at the end of 1999 to 2.77 million at the end of 2004. The average outstanding loan of ASA was only $75 at the end of 2004. Similarly, Share Microfin Ltd. in India increased its active borrowers from about 15,000 in March 1999 to 437,000 at the end of 2004 at which time the average outstanding loan was only $83. AMRET (formerly EMT) uses commercial approaches and now serves over 100,000 clients. At the end of 2003, its average outstanding loan was $61. With its commercial approach, Unit Desas of Bank Rakyat Indonesia expanded its deposit services substantially to over 29 million rural deposit accounts at the end of 2004. In all these cases, the number of poor clients served increased dramatically. In addition, commercial institutions are not only providing services to more poor clients than most noncommercial institutions, they are also providing a wider scope of services of better quality.