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Role of MFIs in building
sustainable livelihoods of the poor
It’s all about financial servicesUnbundling Microfinance Products and Services
Marcus Fedder
Managing Partner
Agora Microfinance Partners LLP
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MFIs serve their clients best when concentrating on providing the fullest range of appropriate financial services to help the poor build their livelihoods
A combination of MFI-provided financial services and NGO-provided multi-pronged interventions can lead to a greater success in alleviating poverty for the poor and the very poor
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Agora works in close partnership with Concern Worldwide on the Board of AMK (Cambodia's largest MFI in terms of number of clients) and in the creation of greenfield MFIs
Agora and Concern select countries and areas to build greenfield MFIs on the basis of detailed market research
Concern’s presence in the countries in Africa chosen for greenfields is a key criterion as
Operating in the field, Concern has in-depth knowledge of the population and of micro business potential
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Agora and Concern expertise and focus complement each other
Microfinance is one building block in Concern’s holistic approach
Agora focuses on providing full range financial services:
- Loans
- Savings
- Remittances
- Insurance
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Focusing on "microfinance only" is a conscious decision not to provide "microfinance plus" as an MFI
The important task of capacity building is left to Concern – a specialist in this field
So, are the poor really potential clients for MFIs?
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Relative Poverty Of New VB Clients-Quartile
28%
35%
22%
16%
26%
33%
27%
14%
25% 25%
33%
18%
28%
23%27%
22%20%
27%
38%
16%
Poorest Poor Middle Better-off
2006 2007 2008 2009 2011
Data source: AMK Cambodia
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0%10%20%30%40%50%60%70%80%90%
100%
Poor Medium Better-Off
Consumptions
Asset Buildings
NonFarm
Farm
Data source: AMK Cambodia
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Loan Use by Poverty Group-2011 Poor Medium Better- off
Agriculture 37% 33% 30%
Animals 14% 13% 18%
Fishing CPR 4% 3% 2%
Manufacture 2% 2% 2%
Petty Trade 4% 5% 7%
Services 1% 5% 11%
Cost Migration 1% 1% 2%
Land 0% 1% 2%
Assets 4% 12% 10%
Gold 0% 0% 0%
Debt 5% 3% 2%
Give Loan 2% 6% 2%
Food 12% 7% 0%
Health 8% 2% 1%
Celebrations 1% 1% 2%
Emergency needs 7% 5% 5%
Data source: AMK Cambodia
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Loan Repayment Status by Poverty Group
14% 20%11%
28% 22% 21%11%
21% 24% 24%36% 41%
14% 19% 19%
75%80%
89%64% 74% 76%
54%
63%72%
40%
52%55%
76%79% 78%
6%0% 0%
4%4% 2%
26%
14%3%
25%
8%3%
6%3% 3%6% 0% 0% 4% 0% 2% 8% 2% 1%
11%3% 1% 4% 0% 0%
Poor Medium Bett er-Off
Poor Medium Bett er-Off
Poor Medium Bett er-Off
Poor Medium Bett er-Off
Poor Medium Bett er-Off
2006 2007 2008 2009 2011Multiple Loans-No Diffi cult Repayment Only AMK loan-No Diffi cult Repayment
Multiple Loans-Diffi cult Repayment Only AMK loan-Diffi cult Repayment
Data source: AMK Cambodia
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Specialists provide the best services:
Concern Worldwide as a specialist NGO is best positioned to provide a holistic approach
Agora's MFIs are best positioned to provide financial services at fair and sustainable costs to the client
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As a result, clients have the choice to obtain the most suitable products from the MFI without having to pay for bundled services they may not require
Bundling services and off-loading the costs onto clients contravenes (in Agora's view) the principle of client protection
By letting each institution concentrate on its core expertise and strength, clients are served better and
MFIs are better positioned to maximise their social return whilst realising an attractive and fair financial return for their investors
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