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| Volume 4, Issue 1: May 2006 | ||||
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In This Issue Panel discussion on the paper Building Better Lives: Sustainable Integration of Microfinance with Education in Child Survival, Reproductive Health, and HIV/AIDS Prevention for the Poorest EntrepreneursA
Billion to Gain Global Microcredit Summit 2006 Archived Issues Vol 4 Iss 1 May '06 E-News Information |
A panel discussion on the paper Building Better Lives: Sustainable Integration of Microfinance with Education in Child Survival, Reproductive Health, and HIV/AIDS Prevention for the Poorest EntrepreneursRemarks by Chris Dunford:
The paper that I was asked to write for the Microcredit Summit Campaign is about various ways to integrate microfinance with non-financial services, especially education and in particular, an emphasis on health-related education. Now why health? On one hand, the Summit wanted to demonstrate the relevance of microfinance to other sectors beside microenterprise development. On the other, the Summit recognized that the most common reason microentrepreneurs fail is health problems, for themselves or for their families. It’s common to hear people say, “The poor need more than microfinance to get themselves out of poverty.” Of course they do. But while microfinance is not sufficient, it is necessary, especially for those who are systematically ignored by our governments, corporations and even the most charitable agencies; especially the very poor who are struggling mightily to earn some money, somehow, or who could be earning if given a chance. Let’s say you’re a social entrepreneur. That means you try to steer your business toward its financial and its non-financial objectives, its social objectives as well as its financial and institutional objectives. And let’s say that you’re already doing a good job of providing microcredit and savings services, perhaps even some basic insurance for groups of women. You know these women need and want other services, non-financial services, even if only to become better savers and better borrowers. So what could that “more” be? The operational question is, “How is a microfinance service to be created and maintained to be integrated with other services?” First, let’s be clear what we mean by integration. It’s the coordinated delivery of services from very different sectors to the same individuals or groups of clients. There are three broad types of integration. There’s linked, parallel and unified. You, the microfinance service provider, … could coordinate with another organization to provide the non-financial services to your clients; this is the linked approach to integration. You could create a new non-financial service unit within your organization, with its own managers and staff, or create a separate new organization that you control. This is the parallel approach. Or you could train your staff who come in contact with your clients to use the opportunity of these contacts to provide non-financial as well as your current financial services. This is the unified approach, in which you multi-task your single set of managers and service staff. Now the linked approach seems the most attractive because it appears to involve the least amount of work and cost. In theory that would be true. If you can find another organization that you can rely on to provide good quality non-financial services to your clients and if this organization will grow and expand as you increase your clientele by expanding geographically, and if they will be able to sustain their services with their own independent revenues, then this is the approach you should take. Unfortunately, large-scale, long-lasting examples of the linked approach are the hardest of the three scenarios to find. Realistically, your choice is most likely between the parallel approach and the unified approach. In Bangladesh, BRAC provides a good example of the parallel approach. It’s composed of three separate service units, each with its own managers and service staff for financial, health and community education services. Another smaller Latin American example is FUNDAP in Guatemala, which provides health education and services with one set of field staff, business education and counseling with another, and credit services with another set of staff responding to different supervisors. ‘CRECER’ provides a good example of the unified approach in Bolivia. CRECER’s promotores and promotoras used the opportunity of the regular meetings of women’s groups to facilitate dialogue-based learning among the women in a variety of health and business management topics. There are hybrids of these two models -- parallel and unified, such as Pro Mujer in Bolivia, which has three types of staff and regular contact with clients at neighborhood focal centers. Each type of staff specializes in providing credit and saving services or health education and services or business education and counseling. However, these front-line staff all report to one supervisor, the administrator of the focal center. The hybrid model is parallel at the level of the client contact but unified at the supervision level. Let’s compare the advantages and disadvantages of the parallel and unified approaches. For the parallel approach, the biggest challenge is financing. A major advantage is that the parallel approach can offer a wider range of different services and therefore a broader range of impacts for clients. This is because the services are provided by a specialized staff which has the training and the time to go deeper into the variety of services possible in each sector. However, cost is a multiple of the number of different sectors because each sector needs a separate staff. Though the financial services may be fully self-financing, the non-financial services must depend in large part, or completely, on grants or contracts from third parties. Moreover, you have a coordination challenge because the staffs from very different sectors have very different backgrounds, even different worldviews. For the unified approach, in contrast, the biggest challenge is management. The major advantage is the potential for full cost recovery with a financial margin earned on credit operations, because the same staff is providing the different services during the same contacts with clients. However, a major disadvantage is that the delivery of non-financial services must fit within the context of those regular contacts with clients, forcing a very streamlined approach, which narrows the range of possible services to mostly education, Moreover, recruiting, training, supervising and incentivizing service staff for high quality facilitation of both financial and educational services is challenging, demanding strong commitment by both the institutions’ governors and managers. Now when that commitment is there, however, anybody with the right personality and modest education, can be trained, supervised and incentivized to do good quality adult education. On any topic, at the regular meetings with clients, the education level of staff is not the issue. Either the parallel or the unified versions of integration can work well for a well-managed microfinance service program. But being a well-managed finance program is a necessary but not a sufficient condition for success. There also has to be the will at the highest level of the microfinance institution. For a well-managed microfinance program either model can work, but only if you have the will to make it work. If you don’t, it won’t work. It’s as simple as that. As the saying goes in English, “Where there’s a will, there’s a way.” I believe this translates in Spanish as “Querer es poder.”
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