Enterprise counselling entails a MFI or
its affiliate providing business advice
to its clients.
This may take the form of some initial
formal training required before a loan
application can be accepted or
It may come as part of a loan recovery
program where problem loans receive
specific business advice on how to
improve their operations
It may be part of an overall business
education program directed at all of the
MFI OUT REACH
If the MFI's primary goal is to maximise
its potential client base, then business
advisory services should allow it to
service a wider range of clients than a
strictly credit approach.
The intent here would be not only to
service existing microentrepreneurs, but
also to create more of them.
STICK TO ONE'S KNITTING
Whether MFIs should provide business
counselling is a matter of some debate
in microfinance circles.
Some take a holistic view of
microfinance and argue that one can not
look at credit alone.
Others purists adopt a credit only
approach or at least financial services
A HOLISTIC VIEW OF MICRO FINANCE
A holistic, "credit plus" approach has
considerable attraction in terms of
This approach argues that a MFI should
offer a range of non-financial services
to include: business development
services, training, productive or
infrastructure, social intermediation,
organisation building, and empowerment.
Some, such as the Grameen Bank, would
include even social social services such
as health, nutrition, education, family
planning and that like.
A FINANCE VIEW OF MICROFINANCE
The finance view is that MFIs are
basically financial institutions and so
are best at providing financial
A purest might argue in favour of just
lending services, but most would allow
other financial services to be included
in an MFI definition.
Savings mobilisation normally creates
the greatest discussion among micro
In contrast leasing, hire purchase, and
insurance can be suggested with little
The decision as to whether a MFI takes
one approach or another is a function of
its sponsor or organisers, but should be
influenced by two factors:
1. the funding available from a sponsor
or own resources
2. the socio-economic group and culture
to be served.
The choice is perhaps best reflected in
some USA literature which divides MFIs
as training or credit led institutions.
APPROACHES TO MICROENTERPRISE ASSISTANCE
Source: W. Burrus & K. Stearns, Building a Model:
ACCION's approach to microenterprise in the
United States, Washington, DC: ACCION
International, 1997, p. 7.
||community economic development
||welfare recipients and others below poverty line
|| low income persons without access to credit and other business services
||mainly training and technical assistance, client networking, limited lending
||mainly credit client networking referrals, limited training, and one to one technical assistance
||group classes, one to one technical assistance
|| group and/or individual loans
TRAINING LED ORGANISATIONS
As Burrus & Stearns (1997, p. 7)
determined, a training led MFI's focus
is usually at a basic business skills
development: "business plan preparation,
marketing, bookkeeping, and tax
preparation [as well as] motivational
issues and self-esteem exercises."
The initial training is usually
intensive followed by frequent client
The goal is client financial self
CREDIT LED ORGANISATIONS
These services some what more affluent
clients who may be self employed but
lack access to conventional credit.
These organisations provided limited
training and advice and more likely to
partner with a training provider.
The goal is to stabilise and expand
CREDIT LED TARGET GROUPS
As indicated, the level of development
and culture typically determines the
In the USA, for example, these credit
led programs have been directed at self
employed persons lacking access to
As Burrus & Stearns (1997, p. 9)
explain, they may be marginalised due to
"low levels of education or training;
weak English speaking skills; low income
or low level of asset accumulation,
racial, ethnic or geographic
discrimination; recent immigration into
the USA; poor or no credit history; or
CHOICE EVEN MORE BASIC
If the goal is to have one's MFI to be
financial self sufficient, providing low
cost loans, and being subsidy
independent, it is difficult to justify
the inclusion of any significant
It is simply too expensive.
Thus, the question is often decided from
one's resources. It is the funding that
determines the MFI's end target market
and the services provided.
Microcredit may be all the service it
POTENTIAL CONFLICTS OF INTEREST
Even when funding allows, enterprising
counselling may produce some potential
conflict of interest.
- As business advisory officers become
involved with a client business, they
may gradually take psychological
ownership of the project. This may cloud
their judgment where they make loan
- Where business advice is free, some
clients game more from their MFI than
- Fee income for advisory charges makes
a potential conflict between the MFI's
outreach and self sufficiency role.
ADVISORY UNIT SEPARATED
While their positions and size are quite
different, much the same debate on
whether advice was appropriate or not
took place within the formal sector
finance and development banks.
As the Asian Development Bank (Kohli,
1982, p. 30) commented, DFIs have been
instrument in raising the level of
technical and management skills either
by providing training and information
exchange or by organising management
seminars and workshops...Some DFIs
provide industrial counselling to their
clients. Recently, however, some of them
have taken steps to set up specialised
units for this purpose."
Today, most DFIs in the Pacific have
left the advisory business.
MONITORING STYLED ADVICE
As MFI lending is by nature more risky,
particularly as it usually entails less
experienced business people, it is
important to monitor their progress.
As there is little, if any, security,
the loan may prove worthless by the time
the arrears process chasing commences.
This means frequent contact and careful
monitoring of its clients is required.
The more risky the lending, the more
such attention is essential.
At least some of this work might be
considered enterprise counselling, but
there is a question of bias rather than
JUSTIFYING ENTERPRISE COUNSELLING
Nevertheless, one can argue that MFIs
should provide business advisory or
support services on the basis of
Where the local cultural does not
encourage individuals to accumulate
wealth at the expense of others, formal
Western businesses are less likely to
start without help.
It is not so much as the MFI encouraging
people to become commercially active but
rather to be so in a Western sense. This
development from an income generating
activity into a true business is a major
The most basic work is to teach the
concept of planning and that actions
taken today will determine success in
This can be accomplished by means of
a planning game.
One version was created by the ILO for
Fijian villagers, but the concept could
be easily adapted to other cultures and
climates zones with the income and
expenses and their timing changed
The game doesn't raise Western business
concepts but rather the financial impact
of more traditional income generating
activities in rural areas.
START/IMPROVE YOUR BUSINESS PROGRAMS
The next step in developing traditional
activities to businesses is to introduce
more formal Western business practices.
Here the UNDP's Start Your Business
programs and other awareness ideas
become of value.
They raise the idea that other, less
traditional business opportunities are
SOAP OPERA AND VILLAGE PROGRAMS
Unlike urban areas, village programs
need to involve more role playing and
entertain with a message rather than a
formal lecture with home work.
Here play acted case studies can be used
A few minute "soap opera" styled case
study followed by group discussion would
seem an effective means of making the
program interesting but bringing home a
message at the same time.
SCHOOL LEVEL PROMOTIONS
School students are a promising group
for "doing business" programs.
After school activities such as the
Young Achiever Program or Distributive
Education/Work Experience have been used
with success in some countries.
NEW BUSINESS AWARD PROGRAMS
Where MFI clients have been successful,
they need to be promote to maximise
their publicity value.
Some countries have introduced national
or regional contests with cash awards
and much local press coverage.
While these are often confined largely
to urban areas, radio will allow the
ideas a wider distribution.
Such success stories serve as examples
for others considering local business as
well as excellent case studies for more
formal training programs.
LOCAL ENTREPRENEURS NETWORK
People succeed in business through hard
work; there are no easy short cuts.
There are, however, mistakes that can be
A local small business or entrepreneurs
association would facilitate prospective
business people to learn from other's
Such bodies would also create networks
which in turn may provide additional
business opportunities and thus more
MORE FORMAL BUSINESS SERVICES
- business plan development
- loan application preparation
- accounting/book keeping services
- financial planning
- marketing assistance
- tax preparation
- project evaluation
- sourcing equity/partnership funds
FURTHER FORMAL ASSISTANCE
Besides advice, some MFI/DFIs provide
clients with more physical help: access
to computers, business equipment, office
space, factory space, and clerical
When these services are consolidated in
one location, they are sometimes called
Business incubation might involve just
sharing a fulling equipped office or
factory or the creation of a
microenterprise business technology
RE-INVENTING THE WHEEL
Even where funding is plentiful, a MFI
planner must consider what other
agencies are available to provide
microenterprises with business training
and advisory support.
Even at the village level, there are
likely to be a number of government
agencies and NGOs purporting to provide
advice to small business.
These would normally include some form
of advisory unit within the Ministry of
Commerce or Trade. There is also
commonly some form of business
development officer within the Ministry
of Cooperatives. There may also be
separate rural business development
units, agricultural business extension
programs, women in business programs,
and trade promotion advisors.
Many NGOs, church groups and others also
offer some form of advice as part of
MAKING WHAT'S THERE WORK
While it is probably impossible, the
money currently allocated of these
programs could be made more effective
with some planning and coordination.
Where a MFI has a fairly local focus, it
might attempt to do this.
A planning game is needed here as well!
As mentioned MFI's funding and target
group will determine the degree to which
it will provide clients and potential
clients with advisory services.
As the institutions and its target group
matures, MFIs should be careful to
ensure that these advisory services do
not overlap with other programs or
develop into an unintended client
William Burrus & Katherine Stearns,
Building a Model: ACCION's approach to
microenterprise in the United States,
Washington, DC: ACCION International,
R. Christen, E. Rhyne, R. Vogel, C.
McKean, Maximizing the Outreach of
Microenterprises Finance: an analysis of
successful microfinance programs,
Washington, DC: US Agency for
International Development, July, 1995.
K.N. Kohli and U.B. Lay, Industrial
Development: role of specialised
financial institutions, Manila: Asian
Development Bank, 1982.