Paper short abstract:

‘Financial Inclusion’ draws on many levers to achieve its goals, but microfinance is a major one. The microfinance model as previously practised contained elements of exploitation and coercion, and failed to exercise a duty of care. Does Financial Inclusion resolve these ethical flaws, or repeat them?

Paper long abstract:

Microfinance enjoyed a thirty plus year spell as the development tool of choice to raise some of the world's poorest people out of poverty. Its intentions were, largely, noble and honest: to enrich and empower its borrowers, and, as the commercialised model developed, to make a profit as well. But underneath the best of intentions lay practices that required borrowers to face exploitative interest rates and loan conditions; the prospect of coercion through the insistence on the use of group liability; the absence of a recognised duty of care to the vulnerable; and an indifference to the distribution of winners and losers from engagement with credit.

'Financial Inclusion' has replaced microfinance as the preferred tool to achieve a number of the Sustainable Development Goals (SDGs). To what extent, then, is financial inclusion a radically different model to microfinance? To the extent that Financial Inclusion uses microfinance as one of its major levers to deliver on the SDGs, how has it adapted the microfinance model to repair the ethical failures of the past? Has the microfinance of financial inclusion resolved the ethical flaws of old microfinance, or is it the same old wine in new bottles?