Unorthodox microfinance: the seven doctrines of success

Many credit unions are sceptical of conventional microfinance lore. Many are now focusing on commercial viablity rather than on outreach.

Author offers seven doctrines for achieving poverty alleviation targets:

• Open Door Massification: serving a wider range of economic groups leads to better outreach
• Micro-savings: MFI is less dependent on external funding and has higher liquidity for on-lending
• Portfolio diversification: diversifying into work, housing, health, education, transport and security products. The MFI avoids risk of economic downturns in a single sector
• Effiency: better productivity helps MFIs compete with down-sizing commercial banks. Larger loans should contribute more to payment of fixed costs. Salary and incetive structures for staff should be re-evaluated
• Financial discipline: better management of delinquency, loan-loss reserves, loan charge-offs, and reserves of capital and liquidity
• Self goverance: empowerment, matched by checks and balances of economic incentives, financial discipline and systematic vigilence
• Assimilation: poor people should be assimiliated into the mainstream economy by prodviding them with access to comparable financial products and services