It's interesting to read about the backlash against microfinance – in Bangladesh now as well as India (see for example Amy Kazmin in today's FT). Its advocates have always emphasised the importance of relationships, both within groups of borrowers in a community and between the borrowers and the microfinance institution, as crucial to its developmental potential and high repayment rates. So the obvious question was always going to be, so how does that ever scale up? The early successes led to more and bigger banks piling in, and it seems possible that the internal contradictions of large-scale micro-finance are now emerging. Contrast the successes of M-Pesa and now M-Kesho in Kenya, offering transactions and now savings that were always designed to be large scale businesses. But again, it's not obvious that such schemes will transfer between countries because the regulatory environment and structure of the banking industry can be obstacles – see our 2007 report on M-transactions for Vodafone at number six here.

There's a deeper issue as well, which is the need for financial services for those on very low incomes to understand the needs of the customers. These are both culturally specific – financial habits differ greatly from country to country even between say the UK and Germany – and very different from the needs of the better off. And the key need is not access to loans but access to a safe means of saving very small amounts. The low cost of mobile platforms means mobile savings holds out great promise for a transformative financial service. I always believed the microfinance industry was aiming off-centre in its emphasis on borrowing rather than saving.

The best book I know of on the financial needs of poor people is based on detailed diaries collected in Bangladesh, India and South Africa. I highly commend Portfolios of the Poor for anyone interested in this subject. (It was reviewed on this blog.)