'Are you poor enough?' - client selection by microfinance institutions

01.03.2001
The debate between the proponents of maximizing sustainability, outreach and scale and thus serving many poor people (including poorer people) and the proponents of targeting 'the poorest of the poor' (discussed by Dunford in SED Vol. 11 No. 1) continues. The debate is essentially a healthy one, helping everyone involved in the industry focus on what matters: providing financial services to poor people. This article argues that MFI programmes should include the 'nonpoor' on the grounds that this more profitable business can crosssubsidize outreach to the poor, and because, without access to any financial services, vulnerable non-poor people are likely to be reduced to poverty when a crisis arises. Regarding 'the poor', MFIs wishing to service this group should offer savings and other innovative products, since poor people have few opportunities to utilize Grameen-type credit efficiently. Finally, the very poor or destitute may require relief services before they can use most financial products. The challenge overall is to design appropriate products, and efficient systems - and in this way both MFIs and their clients will benefit.