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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Grameen Foundation
(Visit Grameen's Website)
Grameen Foundation's mission is to empower
the world's poorest people to lift
themselves out of poverty with dignity
through access to financial services and
to information.
With tiny loans, financial services and
technology, we help the poor, mostly
women, start self-sustaining businesses to
escape poverty. Founded in 1997 by a group
of friends who were inspired by the work
of Grameen Bank in Bangladesh, our global
network of microfinance partners reaches
over 3.6 million families in 25 countries.
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