At Legatum, we believe that the most effective approaches to sustainable prosperity come from community-based, bottom-up solutions. Entrepreneurs and individuals have an intimate knowledge of the most cost-effective ways to meet the needs of their own neighbourhoods. They are best placed to allocate scarce resources in a productive manner to create opportunity and wealth for themselves and for their broader societies.

Human beings have a fundamental right, duty and need to make their own decisions – for choice (and its consequence) is the transformational process by which people grow. Microfinance institutions provide the opportunity for people to make productive choices, by offering capital to assist in the start-up of small enterprises. Once people plant their feet on the bottom rung of The Prosperity Ladder, they are capable of climbing upward through their own endeavour.

Legatum’s investment approach is predicated upon the recognition that great value can be created during times of transition. For it is during periods of uncertainty that societies are most open to embracing substantial and meaningful change, and it is then possible to harness this transformational power to drive broad and enduring progress.

We believe that the microfinance industry is now at such an inflection point. In an industry that has traditionally relied on non-profit organisations and grant-driven programs, most MFIs have remained small and unable to achieve the scale needed to grow in a capital and labour-intensive industry. Increasingly, however, private and public capital is flowing to professional financial services firms, enabling them to bring better products and levels of service to more people at lower cost. These MFIs are now managed as for-profit entities, subject to market forces that distinguish and reward organisations that provide the highest value to customers.