Microfinance

I am just coming home from an unusually captivating client event about microfinance of an otherwise very traditional private bank that I am not even a client of.

Microfinance is a successful approach to provide very small size loans (in the $100s per client) to micro-entrepreneurs in developing countries, who usually are not creditworthy in the traditional sense. But these loans often make a real difference. We were treated, among other things, to a very informative & energetic presentation cum Q&A by Maria Otero, CEO of Accion International, which evidently was awarded the strange animal of a Social Capitalist Award 2005. Closer to home are the financiers of resonsAbility whose investment fund I'll have to look into. Also, there's likely to be a TV report on the event in tomorrow's 7vor7.

There's two things I wonder about, however: 1) Why is this considered to be a market failure, since the market is beginning to provide microfinance without a great deal of prodding from the public sector, and 2) why is this apparently usually not done for profit even though there seems to be a prima facie viable business case?