Serie: Microfinance School
Banking the Unbanked
Microfinance institutions are now present in almost every country in the world, and are providing access to financial services to millions of people. In this film we look at typical microfinance tech-nologies and methodologies in three very different countries, but with similar needs. Access to fi-nancial services such as savings, loans and insurance is an important tool to help poor people smooth out the negative effects of little and fluctuating income.
Access to money alone is often not enough to lift people out of poverty. In order to facilitate a social change you need be healthy and you need knowledge. In Human Capital we look at a holistic ap-proach to microfinance. Many microfinance institutions combine financial services with education and health programs with the aim of long-term social change. What are the benefits and what are the disadvantages of such an approach? How do you measure social change?
The Micro Investors
Microfinance moves billions of dollars annually and is becoming more and more interesting for tradi-tional financial institutions and investment funds. In this film we take a closer look at what happens when microfinance moves to bigger business. Can microfinance be the starting point of bigger finan-cial institutions? And which impact does microentrepreneurs and private banks have on alleviating poverty?
Microfinance institutions traditionally have targeted women. They have proven to be more reliable debtors and the loans tend to bring more benefit to the whole family. A dollar to a woman is a dol-lar to the whole family, so to speak. In this film we focus on microfinance projects and/or institu-tions targeting women especially. How are these projects different from microfinance that targets both genders? How can access to financial services be an effective tool towards a gender equal soci-ety, both economically and socially?
The Price of Money
It is often observed that the interest rates charged by MFIs are high. Why is lending money to the poor such a costly affair? Can the poor afford the cost of loans? In this film we look at the factors that set the interest rate for micro-loans. Are high interest rates necessary in order to ensure sus-tainable financial services for the poor?
Life Cycle Events
What does it mean to be poor? What happens if someone in your family gets sick or your house needs repair? Such life cycle events can push poor people into extreme poverty. In this film we see how access to financial services can limit the effects of such events, and despite of a marginal life, help households maintain their dignity.
Best Practise: Miles for smiles
Katherine Kitongo identified a problem in Ugandan markets. The different stalls where often run by single mothers forced to bring their children to work with them. It is a double whammy; the children did not go to school and the mothers could not run their business as effective as they wanted to. Katherine's answer was Miles to Smiles, a daycare center for the children of the women in the mar-ket. And the fees for the daycare center? Katherine set up a loan and savings group for the mothers at the center.
Best Practise: Diaconia FRIF
Like many microfinance institutions, Diaconia FRIF does not ask for any collateral for their loans. They believe in a moral guarantee, a relationship based on trust. In order to establish this, Diaco-nias credit officers research the potential clients. Are they who they say they are, and can they be trusted? The methodology seems to work; less than 0,5 % of Diaconias clients default on their loans.
Microfinance practices span from individual bank like services to petty, short time loans taken up in groups. It can finance production enterprises with several employees as well as being the little cash you need to buy a bag of rice at the big market to sell in small with a tiny profit in your neighbor-hood. Some of the loan takers have a good understanding of investment, interest and risk; others have no thought for the day after tomorrow. In this reality, microfinance in all varieties is a tool with a great potential. It is not the only one, and it does not always work. In this section “Best practise” we will publish only the good stories, those that can inspire to continue the work to reduce poverty through microfinance.
Katherine Kitongo identified a problem in Ugandan markets. The different stalls where often run by single mothers forced to bring their children to work with them. It is a double whammy; the children did not go to school and the mothers could not run their business as effective as they wanted to. Katherine’s answer was Miles to Smiles, a daycare center for the children of the women in the mar-ket. And the fees for the daycare center? Katherine set up a loan and savings group for the mothers at the center.