Linking Microfinance and Safety Net Programs to Include the Poorest: The Case of IGVGD in Bangladesh (Focus Note No. 21)
Hashemi, S.
Publication Date: 2000
Published by: Consultative Group to Assist the Poor (CGAP)
Document Type: Paper
How can microfinance reach the “Hardcore” poor?
This focus note presents the successful effort of IGVGD in addressing the hardcore poor through its microfinance operations. The BRAC-IGVGD provides free food grains for an 18-month period to destitute, female-headed households that are at the highest risk of hunger.
The paper highlights that the hardcore poor have been excluded from conventional microfinance programs as:
- Hardcore poor form Potentially Risky lot of the client segment.
- Preference is given to the Better off of the poor, as the repayment from them is assured.
- There is fear that destitute households would consume the loan amount or would be too poor to make regular repayments.
The paper highlights that essential elements of the program involve:
- A food grain safety net,
- Imparting skills training,
- Provision of financial services in the form of savings and credit.
The paper discusses the issues faced by the program. These indicate:
- Interest charged from microfinance loans is not enough to cover the cost of servicing the clients;
- Provision of non-financial and financial services within the same institution leads to reduced efficiency;
- There is a need for clear operational separation of activities within the program.
The paper concludes that the success of the IGVGD program points to the need for developing creative opportunities for leveraging microfinance in the battle against poverty.
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