A hospital is opened in a village. It surveys the village. Half of the patients in the village are suffering from chronic tuberculosis, advanced stage cancer etc. The other half are suffering from relatively more easily curable problems like early stage cancer, asthma etc.
The hospital decides to focus on the second half first and move on to the first category after dealing these ones. Additionally, by personal discretion, it does take some cases from the first category whom, judging by the level of their desire for treatment and efforts to help, it finds deserving of preferential treatment.
So do we say that this hospital is commercialized and not focusing on the most needy? I don't think so. I think its decisions are very logical.
You may have already guessed the analogy. I don't see why there is such a huge problem with MFIs focusing on the poor and not the ULTRA-poor. Why do we hear so much criticism of such MFIs?
Is it a crime to be not-so-poor, simply poor? Does that deprive you of the right to receive a loan? Even they need loans! Or wait, are we waiting for them to become ultra-poor and then reach out to them?
Please explain what's the whole hype about!
7 comments:
I guess the question in my mind when I read this post is a different one: why not work with them all? What is the binding constraint?
I agree with Nachiket here. Further, a slight problem I see with the analogy is that patients with chronic illnesses are unlikely to 'improve' and join the ranks of the easily curable...the consequences are easily imaginable.
In any case, MFIs are not always clear that they will reach the ultra-poor 'after' dealing with the poor. The 'after' may well never come, given the scale of poverty in our country. More importantly, I think the problem is with positioning and publicity. As long as MFIs attempt to position themselves as successful financial intermediaries for all the poor (without explicitly excluding the ultras) and attempt to gain publicity by making tall claims of successful poverty alleviation (claims that are often based on inaccurate estimates and methods), they will continue to be reminded of the ultra-poor. I would gladly welcome a forthright MFI that specifies the market segment it is targeting.
I agree with nachiket and suvojit. But i have something unconventional to comment on. Let us analyze it from the point of view of a MFI. MFI is not just to make it good for poor, it has to sustain itself and earn profit too (it is a point of view of a MFI). This might be the reason they go for classes of poor from where they have easy and continous access to repayments, build up their outstanding loans, improve their returns and may be attract equity investment later. The logic they would give for this conduct is purely economical, "Being an MFI we would like to target the segment which can create backward an forward linkages, which is a section of urban poor/not ultra poor. We expect the benefits to TRICKLE DOWN".
My attempt was just to clarify the situation and answer the part of question WHY??
But whether or not their claims are legitimate, is still a question to research on.
"HOW" is still waiting for the answer !!!
Nachiket- yes, exactly, what is the problem in working with them all? Why would someone go and do an impact assessment and criticize the MFI for having a majority of poor and not ULTRA poor clients! And really, I've lost count of the number of times I've heard people saying that just in the past month.
Suvojit- the idea was of diseases, a bit more difficult to cure, chronic tuberculosis is also curable but now lets leave that to the doctors :) we could modify the names
even if the 'after' doesn't come for a long time, that's ok! those poor being made better off is also poverty alleviation!
I would also welcome an MFI specifying its target market, but I'm sympathetic for them cz they'd be bombarded with the criticism of both researchers' and politicians for the reasons stated
Deepak, even if it takes time to 'trickle down', its still helping a certain population in the meanwhile is my point (who need loans too)
Pallavi, yes i agree with you. But what i am trying to do is to answer nachiket's question of WHY not work with them all, from the point of view of an MFI and the logic they give behind it.
TRICKLE DOWN thing is very trivial, one cannot comment on it before conducting some cost benefit analysis (there are costs of waiting the trickle down to happen). This might be a research idea for CMF programme heads and RA's but is little tricky.
@pallavi: thats right - the poor being served is good work in its own right. Given that the MFI model has taken the seriously commercial route (as it rightly should), we should moderate expectations about what an MFI can and cannot do. And my point about clarity in mission had the above point in mind
@deepak: As far as I remember, in some of the CMF studies, the data on loan usage showed a significant tilt towards consumption loans. This then has a marginal effect on increasing the scale of businesses. Most businesses supported by microfinance are usually single family member activities like a kirana shop or a dosa making cart/shack...not really the kinds that would generate employment in the immediate economy. So the wait for trickle down is going to be a tricky one...we are really looking at SME loans for that kind of spill-over effects in the immediate economy and those loans are far beyond the scale of little MFI loans at the moment
yaa i agree with that, but this is what MFI's use as defence for extending loans to non ultra poor. I would still go in favour of some study to find out how legitimate is the claim. precisely, one can do small study to see if there is some linkage (if any) between loan extending to non-ultra poor and ultra poor.
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