Paper
Are You Poor Enough? Client Selection by Microfinance Institutions
Can you include the vulnerable non-poor in microfinance clientele?
2 pages
The briefing note argues that MFI programmes should include the 'non-poor' to cross-subsidize outreach because vulnerable non-poor are at risk in crises. Finds that interest for loans in the formal sector is 2-4 times less than in MFIs while attendance at weekly meetings is unpopular. The non-poor also represent a greater risk to MFIs with inferior repayment records however their vulnerability helps make poverty dynamic. Concludes that:
- Careful market research is needed to assess and understand needs and opportunities;
- High drop out rates can be traced to targeting inappropriate products;
- Development of microfinance should extend away from the village banking and group lending replication towards Financial Service Associations;
- Impact will depend on the efficiency, appropriateness and quality or organizations' systems and products.
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