Microfinance claims to have a “double bottom line.” Lending to poor populations in developing countries needs to be profitable to be sustainable, while social impact in terms of achieving “financial inclusion” is also demanded by those who invest in the industry.
The truth, for microfinance as for any other industry, is that there is only one bottom line: the financial one. A “double bottom line” is a misleading metaphor.
There’s a growing body of academic research about microfinance in Cambodia which makes that conclusion hard to escape. The latest addition, funded by the National University of Singapore and published in June, was carried out by W. Nathan Green, Theavy Chhom, Reach Mony, and Jennifer Estes. Their key argument is that financial performance indicators used by the microfinance industry in Cambodia, especially portfolio quality, “hide and exacerbate” the ways that borrowers juggle debt between formal and informal lenders.