How Many “Plus-es” Can We Add to “Microfinance ++?”

Many MFIs that want to increase their impact on the lives of their customers and families have developed non-financial products and services, such as schools, healthcare clinics, and vocational training. Adding on such a service is sometimes referred to as “microfinance-plus.” It is not only important for MFIs with strong social missions, but also can help increase customer satisfaction and retention, and so may also be good business sense in some cases.

But is there a limit to how far MFIs should stretch their core operations to address client needs, and at some point do you risk losing focus on what made the MFI successful in the first place?

This was a question that was posed by one of the audience members to P.N. Vasudevan at a recent CGAP event.

Vasu is the Managing Director of Equitas, an exemplary MFI in India whose responsible finance practices include ROE cap for investors, a policy of not lending to customers who have more than two other loans in urban areas or one other loan in rural areas, and flexible, client-friendly policies for loan delinquency.

Along with these practices for their microfinance operations, Equitas has taken microfinance-plus to another level, offering not just health services, education, and commission-free insurance products, but also launching a series of stores open only to Equitas customers, where they can buy goods to sell at wholesale prices, savings input costs for their microenterprises. Since so many microborrowers are typically small-scale vendors, this would seem like a good added value for the customers, but also raises questions of whether an organization that specializes in lending can successfully enter the wholesale distribution business, even at this small a scale.

As Vasu explained, Equitas is being very careful to keep the management of the stores separate from the financial services side of Equitas, so that it thrives or fails on its own. The project is still in its initial stage, so we will have to wait and see whether it becomes a self-sustaining enterprise that offers added value to Equitas customers, and maybe redefine the limits of “microfinance-plus.”


07 September 2012 Submitted by Dr V.Rengarajan (not verified)

1. The post, highlighting the values of MF pluses, is something unique and worthy for the consideration of the practitioners towards achievement of their social mission and sustainable poverty reduction… Thanks to Rafe.
2. The real qualitative impact of MF towards achieving ultimate goal, hinges more on effective assimilation of these MF + + both at institutional and household level as well . A redefined MF pluses concept is therefore is needed as it is useful for better appreciation of the practitioners and the researchers as well in this arena.. Further, since ‘micro credit’ unfortunately takes monopoly space in MF arena in the poverty sector, let us have initial focus on ‘Micro credit pluses’ and then followed by ‘Micro Finance pluses’.
3. While ‘Micro credit pluses’ indicate other micro financial inputs such as micro savings, micro insurance , remittance services, micro pension etc there by making candid holistic Microfinance for ensuring ‘protected ‘ environ to the household , ‘Micro financial pluses’ include mostly ‘non financial inputs’ essentially required for supporting the function of productive micro financial services at clients’ level.. Here again it may be noted two types of non financial pluses. The first group of non financial pluses representing the inputs such as capacity building , access to raw metrical, power, roads, transport, marketing , storing ( eg.milk chilling plant for dairy clients) , pricing etc., which are by and large facilitate for enhancing the productivity of micro credit and sustaining income generation at client’s livelihood level. The second group of non financial inputs represent such as health, schools, nutrition, sanitation , Water, gender development etc which they all collectively help ensure general wellness or welfare of the poor household at community level..
4. Both micro financial pluses and non financial pluses, when effectively integrated at field level, go a long way for sustainable poverty reduction. Here two moot points . How many MF pluses to add ? as raised by Rafe and can MFI deliver these pluses single-handedly or what extent can MFI stretch these pluses to the clients.? Since demands are varied depending on the different socio economic profile and status of the target clients in poverty sector and the needs for their Income generation activity undertaken with the micro credit assistance, single or multiple plusses ( both financial and non financial) may be required. It requires meticulous credit planning based on physical potential of the given area and the capability of the clients. However provision of micro credit plusses for any income generation activities should be made mandatory. Regarding delivery of these pluses, it would be better if MFI can arrange needed plusses of their clients to what ever extent they could stretch either individually or severally in coordination with the concerned institutions /agencies besides micro credit After all many MFIs who are erstwhile NGOs may not find difficult since the have been earlier doing very active social services in arranging to ensure all these non financial plusses associating with the concerned development institutions/agencies. Local Government has also stake for the provision of non financial pluses in terms of infrastructure needed for credit absorption effectively in the given area/region. What is required here is the need to focus more on the ultimate goal – sustainable poverty reduction by the synergistic endeavor collectively by different players with different plusses
5. Regarding the provision of MF plusses by Equitas, they are all worthy emulation elsewhere. Coverage of micro insurance ( micro credit plus ) and marketing arrangement for the small vendors ( MF non finance plus ) assume significance in terms of ensuring protected and productive livelihood at client level. It is immaterial whether the institution specializes activities such as lending and whole sale business or running the school simultaneously, so long they don’t derail from their ethical mission and social vision in terms of making a dent in Indian poverty canvas locally and contributing to MDG globally.. In such case, there is no need for limitation to MF pluses.

07 September 2012 Submitted by Rafe Mazer (not verified)


Thanks for such a detailed response. On your third point, you seem to suggest a hierarchy of “pluses,” with a first tier and a second tier of priority areas based on their direct relation to income-generating activities. Do you mean in this differentiation that one should be done before the other, or are you just pointing out that they are different classes of added value you can link to the actual financial product?


07 September 2012 Submitted by Dr V.Rengarajan (not verified)

Thanks for your response. Although I made some differentiation among the plusses, it is just different classes of added value one could dovetail with the actual financial product. The differentiation has been made deliberately for clarity, identification, MF planning and sequential arrangement of these ‘plusses’ according to the needs of the different classes of poor clients in the hierarchy of the poverty pyramid with a bottom layer ( the poorest) and a top layer (the poor)

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