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The destitute—individuals at the very bottom of the socioeconomic scale—are still
outside the current scope of most microfinance institutions. These individuals are left without
any access to financial means for a few reasons: self-exclusion from fear of incurring debt,
exclusion from loan groups unwilling to take on a potentially risky member, or exclusion from
MFIs so they can better control their loan portfolio and default rates.15 But perhaps the most
important reason why this population is without access to credit or other financial products is that
most of the destitute need other forms of assistance in their daily lives – such as food, shelter,
training and education, access to health care, emergency aid – before they can make progress
using a typical microfinance loan. If microfinance is to be fully leveraged as a povertyalleviation
tool, then it cannot ignore these vital issues and this particular segment.
To service this segment of the population and help graduate them to become
“microfinance-ready,” MFIs have no choice but to expand their offerings to include non-financial
services. To date, many microfinance organizations have yet to expand their target market to
include social services for reasons such as cost and specialization of services. But for the few
that have adopted creative solutions to link microfinance with social services or even offer social
services as a platform to get clients onto the microfinance track, the results show that it is
possible for microfinance to reach the poorest of the poor. Two pioneers in creating innovative
solutions to reach those at the bottom of the poverty ladder are Grameen Bank and BRAC.

Microfinance: A Platform for Social Change
by Marge Magner
March 2007
Grameen Foundation

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