> MFIs:
Common Constraints to Successful Outreach Efforts
  • Motivation

    Most executive staff set goals that are too safe and conservative - they lack the passion necessary to set the bold goals that are required in the field of microfinance. Many microfinance executive staff also tend to have difficulty believing that the poor can be trustworthy and reliable loan clients. If the staff have charity mentalities, it will be virtually impossible to achieve success in microfinance.

  • Loose targeting.

    A common problem of MFIs is that they suffer "leakage to households that are not poor or, at best, near poor." Targeting the poorest of the poor is incredibly difficult. Finding the poorest clients is often very difficult since they do not have as stable and permanent lifestyles as those with more wealth, and therefore many MFI staff will settle for the more well off who are easier to find and quick to respond to the call.

  • Unsustainable practices.

    If MFIs consider themselves anything less than strictly business they will not succeed. MFIs need business plans, clear goals, and proper strategies to keep their organizations healthy. MFIs will often become lazy when they rely too much on grants or subsidized funding for their sole source of incomes since grant makers do not commonly place very strict requirements or monitoring systems on them.

  • Inadequate resource mobilization.

    Outreach requires that MFIs have a strategy for resource mobilization. If MFIs do not place importance on this, their outreach efforts will be limited and restricted to their grant funding.

  • Legal constraints.

    MFIs must prove to their funders and their borrowers that they are preforming legally, which can be achieved by having a legal persona as their financial intermediary. Without this legal persona "MFIs limit the range of financial products they are willing to offer the poor households, thereby limiting the extent of their market."

  • Trained workforce.

    Staff must be skilled in providing financial services to the poor. If they lack these resources they will not be able to go further than simply identifying the problems.

  • Effects of negative government policies.

    If the environment that the MFIs exist in is not opposed to their goals, economically and politically, then MFIs will have a much easier chance of achieving success.

Getubig, I., J. Remenyi, and B. Quinones (eds.). 1997. Creating the Vision: Microfinancing the Poor in Asia-Pacific. Issues, Constraints, and Capacity Building. Malasyia: Asian and Pacific Development Centre, pp 10-13.

Hari Srinivas - hsrinivas@gdrc.org
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