These work as profit companies and extend loans to the entrepreneurial poor at the middle of the pyramid. This is an important distinction which I want to emphasize as this brings into salience the continuing need and relevance of this model. There is an important role which both models of microfinance fulfill in the critical areas of training and capacity building of the poor.
This enables them to graduate to larger loans and to setting up sustainable, scalable, self-sustaining enterprises and income-generating projects which pay for themselves. The most serious limitation of microfinance is that it does not address all needs holistically. There is a problem of scaling up, and in this lies the promise of inclusive finance which links the poor to the formal financial system.