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The clients of microfinance—female heads of households,
pensioners, displaced persons, retrenched workers, small farmers, and micro-entrepreneurs—fall into four poverty levels: destitute, extreme poor, moderate poor, and vulnerable non-poor. While repayment capacity, collateral
availability, and data availability vary across these categories,
methodologies and operational structures have been developed that meet the
financial needs of these client groups in a sustainable manner.
More formal and mainstream financial
services including collateral-based credit, payment
services, and credit card accounts may suit the moderate poor.
Financial services and delivery mechanisms for the extreme and moderate
poor may utilize group structures or more flexible forms of collateral and loan
analysis. Serving the destitute is more
challenging (and impossible for many financial service providers), but
innovative schemes, such as the Bangladesh Rural
Advancement Committee's IGVGD program, have opened up pathways to economic
activity and access to financial services for them.
The client group for a given financial service provider is
primarily determined by its mission, institutional form, and methodology. Banks that scale down to
serve the poor tend to reach only the moderate poor. Credit
union clients range from the moderate poor to the vulnerable non-poor, although
this varies by region and type of credit union. NGOs, informal savings and loan groups, and community savings
and credit associations have a wide range of
client profiles. Of the
more than 150 microfinance providers that report to the MicroBanking Bulletin, those lending
to individuals tend to reach the moderate poor, with an average loan balance
divided by GNP per capita of 91%.
Donors and investors wishing to assess the relative poverty
of an institution‚s clients can use CGAP‚s Poverty Assessment Tool.
Although it can take up to four months and cost $10,000–$15,000 to run, depending
on context. The Poverty Assessment Tool provides a more standardized and globally applicable set of
indicators than those provided by conventional targeting tools. It is primarily
suitable for donors and investors.
CGAP
Focus Note No. 17: Microfinance and Risk Management: A Client Perspective (Washington,
D.C.: CGAP, May 2001).
CGAP Focus Note No. 18: Exploring Client Preferences in Microfinance: Some
Observations from Safesave (Washington, D.C.: CGAP, September 2000).
Carla Henry, Manohar Sharma, Cecile Lapenu, and Manfred Zeller, Assessing
the Relative Poverty of Microfinance Clients (draft prepared by the International Food Policy Research Institute for CGAP, Washington,
D.C., July, 2002).
Stuart Rutherford, The Poor and Their Money (Oxford:
Oxford University Press, 2000).
G. D. Westley and B. Branch, eds., Safe Money: Building
Effective Credit Unions in Latin America (Washington, D.C.:
Inter-American Development Bank, 2000).
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