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Increased funding for
microfinance is generally conditional
on fulfillment, or at least
prioritization, of financial
sustainability criteria specified
by Consultative Group to Assist the Poor (CGAP) and bilateral donors.
Financial
Sustainability Policies
The particular policies introduced
include one or more of the
following:
- Rapid expansion and
increasing the ratio of clients
to staff
- Group-based delivery and
particularly mutual liability
groups, to cut the costs
of identifying and reaching
clients and to increase the
pressure for repayment.
- Microfinance product
design to
maximize revenues and
minimize risk for the
programme: increasing
loan interest rates,
introduction of savings,
shares and loan insurance.
- Minimalist services: separation
of microfinance from other
development activities
and cutting non-financial
services to a minimum
The disciplines imposed
by these financial sustainability
criteria have undoubtedly
improved the cost-effectivess
of some badly run microfinance
programmes where claims of
development and empowerment
were mainly masks for inefficiency.
There is also a need for financially sustainable banks serving large numbers of 'better-off' poor where women have access to all products and services on an equal basis with men. It is nevertheless clear that
in many cases gender policies
and empowerment are often undermined
by the unthinking and contextually-inappropriate replication
of particular policies introduced
to increase financial sustainability.
Widening the sustainability debate
For the whole microfinance
sector, financial sustainability must
be seen not as the prime goal
in itselfbut as one element in sustainable
financial services for development. Different women need access to different types of financial services, some of which can be financially sustainable through following current 'Best Practice with a gender lens'. Even here there are many different ways
of attaining financial sustainability.
Some can even contribute
to women's empowerment. Others
have serious negative gender
implications for many women.
The most serious consequences
of the unthinking replication
of some 'Best Practice' policies
for short-term financial sustainability
are for poverty reach and impacts
for the poorest women. In MFIs claiming to have a development role and using development funds there is a need
not only for a longer term
conceptualisation of financial
sustainability itself in
combination with gender analysis,
but to widen the sustainability
debate to include:
- Financial
sustainability :
calculated in economic terms,
balancing monetary costs against
income over the longer term.
- Organizational
sustainability :
assessed in terms of
durability of the MFI,
NGO or independent
grassroots organizations
and other institutions
which will continue
to exist once the NGO
has phased out.
- Developmental
sustainability: contribution
to changes in inequalites,
linking of clients
to mainstream sources
of finance, capacity-building
of clients, client
livelihoods and civil
society development
which will continue
even if micro-finance
ceases to be available.
The micro-finance sector needs to move beyond blueprint models to recognise the need for
a range of developmental as
well as sustainability criteria in programme design
and evaluation to ensure that
financial sustainability is
achieved alongside, rather
than at the expense of, development. This move is currntly occurring in relation to general social indicators and poverty, but there is continuing marginalisation and often considerable resistance to fully integrating gender into these frameworks.
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