Methods and techniques

Microfinance institutions have different goals than banks. The products and services offered by MFIs are also quite different from what banks offer. Microfinance products are also different in the way they are delivered. In this chapter we will look at the main methods and techniques of doing microfinance practically: selecting clients on the basis of their poverty status (“targeting”), organising clients into groups (“joint liability groups”), securing loans with instruments that have little or no market value (“collateral substitution”) and combining financial and non-financial services. Each technique reflects an effort to reconcile the needs of poor clients with the institutional interest to ensure profitability. Every one of them stands for the double bottom line in microfinance.