In the previous article, we learned that microfinance programs can sometimes be ineffective in empowering women clients. Lack of proper loan monitoring, capacity building programs, and culturally-tailored microcredit schemes can lead to inequitable effects.
The spread of inequity is not limited to a certain gender only. Muhammad Yunus, the pioneer of microfinance, has acknowledged that microfinance is used inappropriately by institutions that adopt weak due diligence policies and exorbitant interest rates.
Amidst such adversities, there are some organizations that have been working towards enhancing the microfinance scene. BRAC’s Microfinance programme, which was launched in 1974, is one of them. Through BRAC’s “credit-plus” approach, customised financial products and supply chain focused capacity building services are made available to clients.
South Pacific Business Development (SPBD) also joins in by offering its microfinance customers additional capacity-building services. Along with credit, savings, and insurance products, SPBD guides its microentreprenuer clients through on-going business and financial training.
As per latest impact results from SPBD Samoa, over 90% of SPBD’s microfinance programme members have spent their business profits towards home improvements. And over 70% of their members have invested their earnings towards children’s education.
The world of microfinance is also being enhanced by the pricing disclosure initiatives of MicroFinance Transparency (MFTransparency). Through clear presentation of information on microcredit products and its pricing, MFTransparency helps microfinance stakeholders make informed decisions and dodge over-priced schemes. One of MFTransparency’s current initiatives involves directing attention towards transparent pricing amongst microfinance institutions in Cambodia.
Another advocate of clarity in microfinance is The Smart Campaign. The Smart Campaign focuses on microfinance client protection by promoting principles such as transparency, data privacy, responsible pricing and appropriate product design.
Recently, the Smart Campaign introduced the Client Protection Certificate Program. This certification will help in distinguishing ethical investors, and can be considered as the Fair Trade equivalent for microfinance.
In the list of microfinance innovators, there is also the Grameen Foundation. Grameen’s Progress out of Poverty Index is a tool that objectively measures the extent of poverty in an area. Among several things, the results of this index can be used by microfinance providers to create customised financial products that better meet the communities’ needs.
Microfinance has significantly grown since its inception decades ago. Like every other burgeoning model, however, microfinance has faced some pitfalls along the way. At the same time, there are many organizations working to deal with the difficulties and create effective models that best harness the power of social finance.
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