Microfinance, Not Just Microcredit

Microfinance Information ExchangeImage via WikipediaOne of the major lessons the microfinance industry has learned over the decades is that the poor need more than microcredit. They need a broad swath of financial services.

As soon as they start a business, they want to be able to open up a savings account with you. They want to be able to make easy payments. They want to be able to receive money from relatives who might have gone to some distant city or country.

And you have to offer the whole package deal. Although I do think microcredit continues to be the crown jewel of microfinance. But people don't just wear jewelry. They also like to wear clothes, also undergarments perhaps.

The poor also want to be able to borrow money just to spend. They also want to be able to borrow money for major life events like
IMG_2318Image by ATrumbly via Flickrweddings, funerals. Those also fall within the purview of microfinance. If you don't provide them, they will go to the moneylenders.

The poor also ask for insurance. The poor want the whole deal.

Much as we might decry moneylenders - and I do think low of them - there is a lot the industry can learn from them. For example, the moneylenders know their communities really, really well. They live among them. They don't insist on monthly payments. They are pretty flexible. What if we could not charge criminal rates like they do, but still make the effort to learn the communities, offer more flexibility?
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