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At
its core, poverty is about risk and vulnerability.
The livelihoods of poor people are characterised by occasional
demands for large amounts of money that they cannot cope with,
which undermines their livelihoods. These events may be foreseen
– as in the case with weddings and funerals
– or unforeseen, as in the case with
disasters or emergencies. Either way, it
is the risk of these events occurring, and the vulnerability
to them that makes poverty so dynamic and unpredictable.
In
microfinance the focus is on providing appropriate services
to different client groups. But do these services
reflect the complexity and dynamics of poor peoples’
livelihoods? The challenge is to work in a way that
helps poor people overcome their vulnerability and establish
secure livelihoods.
 Microfinance
as a tool can promote livelihoods through:
- Reducing
risk: Microfinance policies can be designed
to reduce the risk of damage to client livelihoods.
This can be done by ensuring that loan sizes are kept small
and growth in credit is linked to growth in productivity.
In this way, clients can be encouraged to take very small
steps up the staircase.
- Strengthening
financial livelihoods: Microfinance can directly
strengthen its clients’ livelihoods and reduce their
vulnerability by offering services such as savings,
assets, and insurance. In addition barriers to
effective financial and business management can be addressed
through training and education
- Empowering
clients:
Vulnerability goes beyond the ability to manage and grow
household finances. Microfinance can play an important role
in increasing self-confidence or strengthen social
networks. The social intermediation of microfinance
is an important part of its potential impact. Where microfinance
is delivered through groups, and there
is a deliberate focus on strengthening individual self-worth,
connections with other people, and
group solidarity there is potential to both empower
women and improve their sense of self-worth.
- Providing
a platform for broader development: Poor health,
lack of access to education, poor nutrition
and other issues damage poor peoples’ livelihoods
and increase their vulnerability. The potential synergies
between microfinance and non-financial developmental services
can serve to protect poor peoples’ livelihoods and
reduce the chance that shocks send them to the bottom of
the staircase.
Imp-Act:
Making Microfinance Work for the Poor and Excluded
Imp-Act
is an organisation which, through various courses and workshop
sessions, aims at training and supporting Microfinance Institutions
(MFI) in Social
Performance Management (SPM). Although most organisations
have some explicit mention of social goals in their mission
statements, this is rarely seen as a deliberate and managed
strategy. SPM is an institutionalised process of putting
these social goals into practice. It is through SPM
that microfinance can focus on the poorest sectors so often
excluded, rather than an exclusive emphasis on financial efficiency.
For
a more specific look at social performance management and
its focus on exclusion see HTML
For
a Declaration of Imp-Act's Principles see PDF
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