We know the poor need more than microfinance to address the causes and conditions of their poverty. Ideally, the poor would have access to a coordinated combination of microfinance services and other development services to improve business, income and assets, health, nutrition, family planning, education of children, social support networks and so on. The question is how to ensure a “coordinated combination” of appropriate services, especially in rural communities and other communities where multiple services are simply unavailable.
Microfinance practitioners are often motivated to provide nonfinancial services to their clients, because they recognize the need and hear the demand, especially when no other service provider is responding. Microfinance providers feel most comfortable providing access to training that is directly related to the microenterprises they finance and/or household money management and planning. Post # 32 looked at the effects of business education provided by microfinance providers themselves, and post # 50 did the same for financial education for households. Such education or training is good for the client but also can be good for the bottom line of the provider.
Another frequent need and demand of poor households is for help with health issues. There is growing consensus in the microfinance community that health shocks, both the health problem itself and the financial consequences of treatment, disability or death, are the most common shock that can force a household into poverty or drive it deeper below the poverty line—and in the process, force the client to delay or default on loan repayment and/or withdraw all savings on deposit. Providing preventive health education and/or curative healthcare services and/or healthcare products and medications seems a huge departure from the comfort zone of microfinance providers, but a small but growing minority are doing it anyway—and sometimes very well.
As we saw in the last post (# 61), the field agent is the key actor. It benefits both client and provider when formation of groups and service to these groups are provided by field agents intentionally recruited, trained, supervised and incentivized to support positive group dynamics. The same training to support group dynamics can be morphed to prepare the field agents to become effective adult educators in almost any needed topic (business, finance, health or other). In addition, or instead, the field agents can be trained to intermediate between the groups they serve and other organizations that specialize in providing these types of education and service to the groups. Let’s look more specifically at ways the microfinance provider can use the training and dedication of field agents to go beyond the provision of financial services.
Opportunities for “Economy of Scope”
Way back in 2001, the Microcredit Summit Campaign commissioned a paper by Freedom from Hunger on this topic, because of our long prior experience in designing, implementing and evaluating the integration of microfinance with nonfinancial services (mostly education on a variety of topics, including many health and nutrition topics).
In that paper, I identified three scenarios for integrating microcredit with other services, labeled linked, parallel and unified. This typology has turned out to be useful mainly as a heuristic device, to help practitioners understand their options. The growing reality, however, is that practitioners are creating a variety of hybrid scenarios that are becoming more common than examples of these three “types” in their pure form. Nonetheless, it is still helpful to first understand the three distinct “types.”
Linked service delivery by two or more independent organizations operating in the same area. Financial services are offered by a specialist microfinance provider at the same time as nonfinancial services (possibly for health and other sectors) are offered by one or more independent specialist or generalist organizations—to the same people in need. When there are several development service-providers in a target area (as in many urban and peri-urban areas), an organization reasonably may choose to specialize as a microfinance service-provider. Ideally, different services offered by different organizations would coordinate their marketing, including delivery at common points of service and mutual referrals, as clients’ needs for services arise. Many specialist microfinance institutions fall into this scenario; few reach for the “ideal” of coordinated marketing with nonfinancial service-providers. One longstanding example is the close coordination of BRAC’s Rural Development Program (a microfinance provider) with the Government of Bangladesh (and World Food Program) food distribution to the “hardcore” poor. The relationship functioned through the intermediary IGVGD (Income Generation for Vulnerable Groups Development) program, jointly administered by BRAC and the Government of Bangladesh. This has since become BRAC’s Ultra Poor Program (the inspiration for the Graduation Pilots sponsored by Ford Foundation and CGAP).
Parallel service delivery by two or more programs of the same organization operating in the same area. A generalist or multi-purpose organization (often a grant-mobilizing local, national or international private development organization) offers microfinance services through a specialist microfinance staff at the same time as offering other sector services through different program staff of the same organization—to the same people in need. If there are few available services in an area and an organization can afford a long-term commitment to provide two or more services with different specialist staff, then it makes sense to deliver a variety of complementary services in parallel. BRAC again provides the classic example of this scenario in action. The Grameen Family of Organizations is another. However, there are several more recent examples of parallel delivery.
Unified service delivery by one organization, one program with one staff. The same staff of the same organization offers both microfinance and other sector services—to the same people in need. When the people in need have access to few, if any, other development services, as in many rural communities, and the organization cannot afford a long-term commitment to provide two or more services with different specialist staff, it reasonably may choose to field only one set of staff tasked to provide microfinance with another service. The organization even may seek to hold its costs to a level it can sustain with revenue generated by the unified service itself. Credit with Education providers are good examples.
An example of a hybrid scenario is Crédito con Educación Rural (CRECER), a unified, multi-sectoral service provider, linked through joint planning and coordination of services with rural health service-providers in Bolivia. CRECER offers a classic village banking service in mostly rural areas with limited services. The field agent (promotor/a) provides the same support to the village banks (bancos comunales) that other village banking field agents provide, but they also lead or facilitate at the village bank meetings to help members learn a variety of health, nutrition, business and financial education topics determined by CRECER with input from members. Where there are adequate-quality health services offered by other institutions nearby, CRECER contracts with them to provide specified services to members for a discounted fee. The field agents also organize events (jornadas) that bring health personnel to a rural location for a day to provide diagnostic exams, simple treatments and referrals to the clinic or a hospital for more extensive treatment. The word about timing and location of the jornada is spread through the local CRECER membership, but all local people can come for the health service day, and all pay a small fee for the services rendered. Thus, in this delivery model, the health education is provided through a “unified” delivery system, and the health services are delivered through a “linked” system.
A different hybrid is found among Pro Mujer affiliates, especially well-developed in Bolivia, Nicaragua and Peru. Pro Mujer focuses on peri-urban populations, who come to “focal centers” or centralized points of service for village banking, business education and counseling, financial education, health education and counseling, and healthcare services. The focal center is managed by one administrative staff for all types of service (“unified” staffing model), but each of the distinct services is provided by specialist staff in direct contact with Pro Mujer clients (“parallel” staffing model).
The next post will review the arguments for and against integrating microfinance and other services.