In Microfinance, Clients Must Come First
This paper urges MFIs to adopt a client-focused approach instead of an institution-focused one. Most MFIs have been institution-centered, aiming to serve as many clients as possible by offering a few basic, high-quality, low-cost services. But this does not always serve the cause of poverty alleviation. The paper formulates a theory of client-centered microfinance. Client-centered microfinance nurtures the profitability of borrowers' businesses, and, in turn, clients' economic and social well-being, instead of only nurturing the success of the MFI. Client-centered MFIs would:
- Provide far greater services than traditional financial institutions do;
- Offer not only financial products and services, but also financial education, management training, value chain support and social services;
- Track how clients use their loans and allocate their profits;
- Monitor poverty alleviation using measures of income, as well as those of health, nutrition, housing and education.
Early evidence suggests that client-centered microfinance would more readily alleviate poverty than institution-centered microfinance. If the goal of microfinance is to alleviate poverty, MFIs should adjust their theories of change to a more client-centered approach.
