Should MFIs Offer More than Financial Services?

A new survey conducted by Microfinance Insights shows that 85% of MFIs and 61% of microfinance investors believe that MFIs should aim for wider social development beyond financial inclusion. The data comes at a time when many MFIs are expanding quickly by offering more customers microcredit. The results of the survey demonstrate that MFIs, in their effort to fight global poverty, should offer additional solutions through the relationships they have established with clients.

Seventy-nine percent of MFIs polled offer products and services that are consciously seeking to create social impact beyond simple financial inclusion, including community development (63%), inclusion of minorities (60%), and better employment and labor conditions (53%). In addition, more than 83% of MFIs polled said that they are committed towards poverty alleviation as their primary goal, while 78% maintained their social objective is “women’s empowerment.”

Over 150 respondents were polled, including investors in microfinance. While the results reveal a firm commitment from both MFIs and investors towards creating social impact, concerns remain over the process of measuring impact. The primary concerns among MFIs and investors were the associated time and cost structures. Sixty three percent of the investors polled said that an immature measurement framework is a major issue for impact assessment, followed by 60% who cited cost and time considerations.

Complete survey results can be found in the May/June 2009 issue of Microfinance Insights.

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Comments (3)	Submit a Comment

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22 May 2009

Non financial services

The question I think is: Can MFIs offer non financial services? Most of the MFIs I think will have to redesign their operations and strategy if they want to start offering such services. Are MFIs ready for that?

Adil Sadoq MEDA Morocco

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21 May 2009

Should MFIs Offer More than Financial Services?

Yes. MFIs should arrange other services besides financial services . In the first, the financial services include micro savings, Micro credit, Micro Insurance and other transfer services for the poor clients.. The rationale for offering other services are 1. Micro credit is only a monetary instrument and it acts a medium of exchange of goods & services provided these needed goods & services are available timely and adequately in the context of poverty reduction. So to say physical goods and services should be available in the given place and a mere micro credit alone cannot do the magic in poverty reduction. 2. MFI clients are the poor. The stages of poor clients’ vulnerability differ from household to next and hence diversified social needs to be met through micro credit at household level. 1. In the context of given capability of the poor client at bottom level, these diversified needs are to be addressed at each one of the house hold for ushering in for a sustainable dent in poverty canvas. Then only the mission or goal of MF is achieved. 2. Among these diversified needs, most vital ones include education ( functional literacy + skill training) Health , and Micro insurance. For micro enterprises ( Income generation activities) inputs, power, transport, marketing etc., 3. While we argue that MFI should offer other services, can they alone deliver the expected good ? This task demands more social engineering than financial engineering and ethical servicing for the cause of human being. The process social engineering calls for coordination among other development partners and an integrated approach for creating multiple intervention responses to the inter locking needs of the poor communities. Here the most important point in such a development intervention with micro finance, is that the same MFI client household should get all the services needed to them for coming out of poverty line. with sustainability. . Following are some experimental models of MFI offering more than financial services. 4. a) Linked service delivery by two or more independent organizations operating in the same area. MFI with coordinated marketing with non financial service providers. Example. BRAC’s rural development programme ( micro credit) with government of Bengladesh )and WORLD food programme) for food distribution to the ‘hardcore’ poor. In India the banks while sanctioning credit , they have tie up arrangement for marketing e.g. Dairy scheme- marketing the milk by Milk Cooperative union ( Government/private)and for sugarcane growers marketing of sugar cane by Sugar mills (government /private) b) Parallel service delivery by two or more programmes of the same. organization operating in the same area. . MFI besides offering credit through a specialist , also provide other services through different programme staff of the same organization to the same people. Example. BRAC Credit +Education +Health c) Unified service delivery by one organization, one programme, one staff. The same staff of the same organization offers both micro credit and other sector services. To the same people in need. Example. GB- Credit + Education FUCEC-Togo Credit + Education. GB & BRAC Credit + Insurance, A unified muti sectoral services can be linked with other complimentary services. Example Bolivia- CRECER –Credit + Education+ Health (CSRA) The above exercise is to high light the imperative need to offer other services besides financial ones to the same target group in a given area for a holistic and sustainable social development and demonstrate the possibilities for MFI( individually and or collectively) to offer other services too while they carry out to fulfill their noble mission

Varadarajan rengarajan Independent consultant -Microfinance India

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20 May 2009

Non financial services

Definitely the right thing to by providing non financial services to clients to achieve the double bottom line financial and social and without neglecting the environmental aspect.

Ali Ghezawi Development and Employment Fund Jordan

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