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Financial Services for the Very Poor - Thinking Outside the Box  Image

Promoting Inclusive Markets and Financial Systems

Financial Services for the Very Poor - Thinking Outside the Box

Financial Services for the Very Poor - Thinking Outside the Box

Summary

Most microfinance programmes (MFIs) aim to reach poor people, but rarely manage to serve the extremely poor. This article starts by reporting on a survey of very poor slum dwellers, examining what they value in MFI programmes, and contrasting these with those of not-so-poor clients. Dramatic differences are not apparent, but both groups placed great emphasis on the security of their savings, and on flexible options for loan term and repayment schedules. A further survey revealed that most MFIs reach the upper poor in greater numbers than the very poor. Recognizing their failure to assist the very poor, a number of MFIs have designed programmes aimed specifically at this target group, and  four are described here: Grameen Bank's Nisho Prakalpa, BRAC's IGVGDP, Safe Save (all from Bangladesh), and the Qinghai Community Development Project (China). The approaches taken by these programmes are discussed in the light of the strategies and capacities of these households, though no attempt is made to quantify the targeting effectiveness of these programmes. Some MFIs, such as BRAC, include technical training in their programmes with the rationale that extremely poor people do not have the entrepreneurial skills or assets to use business loans productively. Others take the view that minimalist  programmes can become sustainable and can help very poor people stabilize their income and build a buffer against possible future crises.The final section discusses why very poor people value particular characteristics in microfinance programmes, and how these may be incorporated into programmes as a tool for extreme poverty reduction.


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