Skip to 0 minutes and 17 secondsJorge, what role will commercialization play in the next 10 years according to you? Well I think it is already playing this role in Europe indeed. And I think there are quite a few institutional changes that we're seeing experiencing some MFIs. As I said before, in Eastern European countries probably the commercialization has already gone through and probably finished the process. In Western European countries we will be the problem the shareholder composition will be rather different in the next few years which that will imply to put some more pressure for commercialization for MFIs that are currently socially or more strongly socially oriented. In that case I think results should be positive.

Skip to 0 minutes and 58 secondsWe are seeing the evolution in the sector and the sector keeps growing every year but there's been like a consolidation process. In countries in which we, you found before seven eight MFIs, now you find one national champion or maybe there's a place for two, which will become much more effective and efficient, economically efficient, Which can cover almost a national market. Whether they do it effectively or not is another question, and if there is space for other MFIs.

Skip to 1 minute and 28 secondsBut I think the process of efficiency, the economical efficiency and economic sense for these MFIs is going to be very important for the sector actually for the sustainability of the entire sector and having a presence of a microcredit sector in Europe as we understand microcredit now in the sector. We’ll see what microcredit becomes in ten years. Probably we’ll talk about social finance, something more generic, but per se, I think commercialization will be the key for the survival of the sector in the future. Ok ok, so Daniel, let's get back to the South, so commercialization has already happened in developing countries, isn’t it?

Skip to 2 minutes and 9 secondsBut what are the expected outcomes of this commercialization trend according to you in the next 10 years or so? So I would think there are a couple of potential outcomes that we can expect. One is, institutions that, that basically stopped being microfinance that become normalized, just financial institutions on their own. This is the financial inclusion that sort of you can think of it as an end target of the financial Inclusion objective, alright? Because you don't necessarily want to have financial services from a microfinance institution you just want financial services.

Skip to 2 minutes and 47 secondsTo the extent financial institutions evolve, microfinance institutions evolve to become more normal parts of the financial sector and the financial sector that is targeting the broad mass of the people then that's that success, and I think we we’re already seeing this in some countries and especially the more developed ones like Peru.

Skip to 3 minutes and 8 secondsOn the other hand you probably will have some institutions that continue to specialize and continue to serve the relatively narrow niche needs of micro enterprise development, of social development, be it agricultural or other segments and then in some sense it might actually look a bit more like the types of microfinance institutions that Jorge described, especially in Western Europe where you're talking about institutions that remain relatively small, that target the narrow audience, that have a very specific approach. And they may be commercial or they may not be commercial, it depends but they will definitely be very different types of institutions where they are not driven by volume but actually driven by the focus on the objective.

Skip to 3 minutes and 59 secondsThere are some additional articles which I think if we look 10 years ahead might be a little bit less positive, especially on savings. I don't see broad trends of a high outreach for saving clients really anywhere, maybe with some exception of Bangladesh and Indonesia. Because small savings clients are not very profitable and so institutions even institutions that do savings don't tend to target them a lot, and I think this is one place where strict commercialization doesn't help a whole lot and will require a different type of approach. Would you have any reaction on this commercialization trend? with a perspective from the north.

Skip to 4 minutes and 49 secondsWell I would say that it's not only, its not only positive but even in some cases I think commercialization is necessary, necessary in order to, for the MFI’s projects themselves to become sustainable and in the end to have a bigger impact on the main target, which is in the end financial inclusion as most of the MFIs in Europe say. Curiously in Europe we have all the entire spectrum, from MFIs from Western European countries that are more socially oriented with an NGO-foundation based institutions, organizations to towards more Central European, Eastern European countries in which you see a much bigger degree of commercialization, even indeed some MFIs they transform themselves into banks.

Skip to 5 minutes and 38 secondsI think our main target will be to try to look at closely or how is the process of commercialization, because indeed per se I don’t think it is negative, I think it is positive indeed. But whether this process makes the MFI actually to get off from the initial target on addressing underserved people this is, this is what we need to look at. But per se I think many MFIs many younger MFIs in Western European countries that are actually getting, doing bigger in terms of bigger outreach, bigger number of clients, increasing portfolio quite noticeably every year we see that at some point probably they will need to reach into a certain level of commercialization that must be very interesting.

Skip to 6 minutes and 27 secondsSo we are living quite an interesting process in Europe. Ok, Daniel, I mean let's get back to the South. We have seen an evolution in the mission statements of many microfinance institutions, I mean, it was originally poverty reduction its frequently now financial inclusion, is it a positive development according to you? I would say yes, it's both a positive development, its been a necessary development and I think at the same time it has real negative side effects as well that we should be aware of.

Skip to 6 minutes and 56 secondsOn the positive side if you look at a mission of financial inclusion, that means reaching a broad segment of people who don't have financial access and if you look at most countries where microfinance sectors are developed like Peru or Cambodia, what you'll see is 10 years ago or 15 years ago these markets had excluded the vast majority of the population and in fact banks were only serving it relatively thin slice at the top. It is only through commercialization and through the access to large amounts of capital that microfinance institutions have been able to reach this broad segment of people.

Skip to 7 minutes and 35 secondsThat has come at the expense of sometimes losing focus on on the original intent of microfinance which is micro-enterprise development, which is quite a narrow scope, it requires a very focused approach, and some MFIs continue to do it, some have abandoned it for the large part. They're also those who remain specialized in that area and have essentially not gone the full commercialization route. So so we see a spectrum, much like Jorge has said, but a spectrum that has happened in the past rather than happening now. Ok, thank you.

Debate with Daniel Rozas (e-MFP) and Jorge Ramirez (EMN).

So far, you have had the opportunity to learn the latest academic findings on the commercialization of social enterprises. While we are slowly reaching the end of the course,this video is an opportunity to hear the perspectives of two international leaders in microfinance: Jorge Ramirez who heads the European Microfinance Network (EMN), the network of all stakeholders involved in microfinance in Europe, and Daniel Rozas, the senior microfinance advisor of the European Microfinance Platform (e-MFP), the network of European microfinance actors working in developing countries.

Both of them will share with us their opinion about the role that commercialization will play in the next ten years! I think it is the first time such debate between key representatives of these two networks takes place!

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This video is from the free online course:

Commercialization of Social Enterprises: Stemming the Tide of Mission Drift

Université Libre de Bruxelles