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The holy grail of microfinance: ‘helping the poor’ and ‘sustainable’?
01.03.2000
The term ‘microfinance institutions’ covers a broad spectrum from traditional businesses, for whom social objectives are only a by-product, to traditional social service organizations, for whom reaching the poorest is the prime objective. In between are social enterprises, which are explicitly aiming at reaching very poor people (however defined) but at the same time are aiming at sustainability. This article takes the case of Freedom from Hunger’s Bolivian counterpart, CRECER, and shows how although CRECER is making substantial progresss, its success in meeting both these objectives depends on how they are defined. For example, what proportion of better-off women are allowed among the target group of poor women? And should ‘sustainability’ include, as well as meeting operational and financial costs, repaying the original donor for their start-up investment? It is argued that most social enterprise MFIs cannot and should not attempt to do this but should aim to provide good-value services for poor people for a very long time. -
Credit unions and rural banks reaching down and out to the rural poor through group-based microfinance
01.06.2009
Over the past 15 years, the experience of credit unions in francophone West Africa, Ecuador, Madagascar and the Philippines and rural banks in Ghana shows that adding group-based microfinance (village banking) to existing, locally owned financial institutions in provincial towns is a lower-cost, effective and sustainable alternative to building microfinance institutions de novo in order to extend microfinance to poorer women (many of them so poor their families are chronically hungry), especially in rural areas. The advantage of village banking (as an efficient form of group-based microfinance) may be simply that it keeps costs low enough to facilitate delivery of credit and other services to rural areas that are too costly for other methodologies to reach. The disadvantage of the strategy is that many credit unions and rural banks are relatively fragile institutions; this is compensated by the ability to spread risk across a large number of these relatively small institutions. -
Costs and benefits of microfinance institutions offering health protection services to clients
01.09.2011
Five microfinance institutions (MFIs) in Bénin, Bolivia, Burkina Faso, India and the Philippines developed and offered health protection services to microfinance clients: health education, health loans, health savings, health micro-insurance, linkages to health providers and distribution of health products. After about two years, the services were collectively reaching over 300,000 clients and are continuing to scale up. The cost to the MFI was generally low for each service (average annual net marginal cost of US$0.29 per client and average total annual cost, including allocated expenses, of $1.59 per client). Some were expected to become profitable in the near term. In addition to the financial cost of offering such services and who bears the cost, we discuss the broader benefits both to clients and to the MFIs themselves and suggest that more MFIs around the world could find similar cost-effective ways to deliver health protection services to their clients.