Micro Finance Appendices

EDIAIS: Application guidance note, Oct 01
APPENDIX 1: MICRO-FINANCE PROJECTS FUNDED BY DFID1
Extracted from EDD 1999 Project Data Report, the most recent list available.
AFRICA
AFRICA REGIONAL Title AFCAP (African Capacity Building) To enhance the capacity of microfinance institutions in east, central and southern Africa to deliver financial services to poor clients on a sustainable and replicable basis KENYA CARE-WED Project To develop WED into an autonomous financial institution providing financial services to at least 30,000 poor women in Western Kenya on a cost covering and sustainable basis To enable KWFT to provide financial services to over 15,000 women micro-entrepreneurs on a cost covering and sustainable basis 2,758,188 19952000 19962001 19972000 19961999 19982003 19982000 MF Comm 848,765 Date Funding 19982001 B
Support to KWFT
1,630,000
MF
Co-operative Bank of To assist MFIs to graduate from dependence on grant funds Kenya Ltd - Pump Priming for loan capital to commercially raised debt as a key step in Fund becoming fully financially sustainable institutions MFI Analysis and Support Support to K-REP NGO To put in place a standardised system for the appraisal and monitoring of BASE microfinance institutions To support the innovation of appropriate approaches for financial intermediation for rural and urban poor people to financial resources for personal as well as business needs
455,000
MF
50,000 953,904
MF MF
Co-op Bank Micro Finance To provide short and long term technical assistance to the Pilot Project Co-operative bank of Kenya Limited to build capacity of the Bank to deliver financial services to micro and small enterprises, and poor people generally, on a sustainable and profitable basis. Support to Faulu II To increase the capacity of Faulu Kenya to provide, on a cost covering and sustainable basis, appropriate and affordable financial services to Kenya's urban and rural micro-entrepreneurs To assist BASE to design a new microfinance project To stimulate small business in Kenya by removing or reducing some of the constraints on bank lending to the sector MALAWI Provision of Assistance to FINCA Malawi Provision of technical assistance and loan funds alongside USAID to fund FINCA Malawi's expansion to other areas of Malawi MOZAMBIQUE Zambezia Agricultural Development Programme Phase 2 (ZADP II) Expansion of CRESCE Mozambique Provision of technical assistance and loan funds to develop a village banking credit programme in Zambezia Province Provision of technical assistance to a regional microfinance institution operating in 3 provinces in Central Mozambique SOUTH AFRICA Small Business Development Programme To promote small enterprise development and an increase in the economically active population by entrepreneurial
675,000
MF
2,500,000
19982001
MF
Financial Services for the Poor Barclays Loan Guarantee Scheme
50,000 908,092
19981999 19941999
MF F
720,000
19982001
MF
1,000,000
19982002 19992002
MF
2,000,000
MF
2,400,000
19992002
APPENDIX 2: POVERTY, EMPOWERMENT AND ENVIRONMENT: FINDINGS OF EXISTING IMPACT ASSESSMENTS A2.1 POSITIVE AND NEGATIVE IMPACTS ON POVERTY The main focus of the large-scale impact assessments of CGAP and academic researchers (eg Hulme and Mosley eds 1996) has been the impact of credit or combined savings and credit programs on interlinked dimensions of poverty reduction and livelihoods: particularly incomes, vulnerability and well-being. Frameworks for poverty assessment have varied. One of the most comprehensive and accessible frameworks is that developed by USAID (Sebstad, J., C. Neill et al 1995). NGO assessments have also generally focused on poverty and well-being impacts, often using participatory local criteria. Methodologies in both donor and NGO assessments have generally combined:
quantitative survey often comparing levels of poverty between programme clients and control groups qualitative techniques following through patterns of loan usage Participatory methods and Action Aid
The various frameworks, methodologies and findings have been hotly disputed.2 Nevertheless these assessments have made a very valuable contribution to understanding the diverse ways in which poor people use microfinance in the context of livelihood strategies. It is now clear that:
' the poor ' are not one single category, but a diverse constituency of vulnerable people with complex livelihoods and varied needs.
Microfinance has potential to make a number of important contributions to poverty reduction for both households and individuals3:
to smooth out peaks and troughs in income and expenditure: for example prices of staple foods may fluctuate dramatically making bulk purchase at particular times of year desirable and/or school fees may need to be paid on specific dates, but these needs for cash often do not coincide with times of peak income. Given the difficult circumstances in which many poor people manage very small sums of money, it is often essential to preserve or be able to access particular sums of money for specific purposes and prevent their erosion by everyday necessities.
For detailed overview discussions of the evidence from a wide range of contexts and programmes see eg Sebstad and Chen 1996; Hulme and Mosley 1996; Gulli 1998; Matin et al 1999. 3 This treatment draws on the discussion in Rutherford 1999 and Matin et al 2000.
to invest in businesses or assets including new technology, working capital, productive assets like land or housing as well as luxury items like televisions. For women it may be crucial to their economic security and well-being to have assets or a business in their own name. to cope with unpredictable shocks and emergencies like illness, sudden death of family members and/or natural disasters. For women this may include shocks like divorce or desertion. to make socially required contributions to predictable life cycle or community events like births, marriages, funerals, religious festivals and other social obligations. For children this may include the need to save for their future. For adult women and men this may include the need to save to give them a dignified old age.
SEWA in India for example, based on its own internal learning process, conceives of a range of different ways in which different financial products can contribute to reducing poverty and vulnerability of members (See Figure 1). Examples of diverse ways in which poor people use loans are given in the Case Studies. In Cameroon for example, some loans were invested in assets like land, some loans were used by very poor and disabled women for medicines and repaid through drawing on social and kinship networks. The degree to which microfinance programs have actually succeeded in enabling different groups of poor people to use microfinance in this way has been the subject of much debate. Only some broad and generally agreed conclusions are given here: credit can have a significant contribution to increasing incomes of the better-off poor, including women.
the most significant and widespread contribution, particularly for the poorest, has been in smoothing out peaks and troughs in income and expenditure, enabling them to cope with unpredictable shocks and emergencies. Poor people have also valued increased ability to contribute to life cycle or community events. Many loans, if not most, are used in this way even if they are officially targeted for ' productive investments '.
for the poorest people the useful type of microfinance may be savings rather than credit However:
poor people generally continue to need and use a diversity of credit and savings arrangements including moneylenders, ROSCAs and formal sectors savings as well as the services of MFIs. income impacts on enterprise income for the very poor are likely to be 4
EDIAIS: Application guidance note, Oct 01 small and in some cases negative as enterprises are less profitable, more risky and/or credit is not the only input needed and/or they have been unable to access other sources of finance to supplement loans from MFIs. Although analysis of programme policies has to date been rather superficial, anecdotal evidence indicates that the impact of programs may be affected by details of conditions of microfinance delivery. For example the impact of loans on income depends on the timeliness of loans and flexibility of repayment schedules to client income patterns.
where consumption credit is widely and easily available, poor people may become seriously over indebted. This danger increases as MFIs compete with each other for clients to expand and may become less prudent in their lending in the process. 4 For clients pressures to borrow to meet social expenses like dowry payments may increase, even in communities like many of those in Bangladesh where dowry levels were traditionally low or nonexistent. many insurance programmes have experienced high levels of dropout as people have been unable to keep up instalments in times of crisis. Money paid for previous instalments and which could have been used for savings and production investment is therefore forfeited. poverty targeting: the relationship between poverty targeting and financial sustainability is unclear, with two comparative assessments reaching contradictory conclusions5. This is partly because of inadequate analysis of the mechanisms by which attempts to reach financial sustainability is made. What is clear however from Bolivian experience is that: the scope for cross-subsidy of poverty-targeted lending by lending to the less poor decreases as competition for betteroff clients increases between MFIs and/or MFIs and the formal sector (Rhyne 2001)
This has been the case particularly in Bolivia with the entry of private sector banks into the microfinance market (see Rhyne 2001). 5 Christen et al (1995) in a study of 11 MFIs worldwide found no trade-off. However the analysis is problematic in using loan size as proxy for clients income level and average loan size as a percentage of GNP per capita as a measure of depth of outreach. They argue that scale rather than exclusive focus on the poorest determines whether the very poor are reached. This is however not necessarily the case and is contradicted by example of BRI in Indonesia. Hulme and Mosley (1996) in contrast argue that microfinance programmes did not reach the poorest of the poor and that there is trade-off between sustainability and depth of outreach as measured by clients average income as percentage of the country's poverty line. The majority of institutions in their study had clients below the poverty line but few were very poor. MFIs highly dependent on subsidies like TRDEP and BRAC reach poorer clients that more sustainable MFIs like BRI in Indonesia. Detailed analysis of each MFI showed a strong positive correlation between loan size and household income, and strong negative correlation between loan size and cost of lending. They found that institutions that target the poor had a much higher percentage of clients below the poverty line than those that did not attempt to target the poor only. However open-access institutions because of their larger scale, may reach larger numbers of poor people. Similar disagreements exist regarding the degree to which solidarity group methodology is more effective in poverty targeting than individual lending. (based on account in Gulli 1998)
EDIAIS: Application guidance note, Oct 01 Figure 1: SEWAs Cycle of Poverty and Life Time Financial Needs
Buy business equipment Rescue mortgaged property
Repay old debt Maternity Death Widowhood
Working capital for business
SEWA Bank Loans
SEWA Insurance
Sickness / Accident
Improve / Repair house
Savings at SEWA Bank
Losses in Floods / Riots Festivals Pilgrimage Old Age
Buy new house Marriage of Children Education of Children
Source: SEWA Bank Reports
It is also clear that in assessing impact on poverty reduction assessments must take into account:
the complexities of livelihoods whereby impacts on well-being and consumption cannot be inferred from impacts on earned cash income. Peoples consumption may improve through more efficient expenditure patterns even where earned cash income does not increase. Earned cash income may increase but be spent on alcohol. complex relationships within households which mean that impacts at the individual level cannot be inferred from impacts at the household level. The degree of fit depends very much on the nature of power relations within households, which vary in their normative expectations even between households in the same families (ie wider kin or marriage-related groups) and communities. complex relations within markets and communities which means that aggregate short-term increases in the incomes of clients may impact negatively on longer term prices of products through creating oversupply and/or impact negatively on the incomes of those excluded
EDIAIS: Application guidance note, Oct 01 from programmes. Conversely there may be much broader positive spin-offs in terms of increased employment, supply of goods, demand for inputs even where the impacts on clients individual incomes or consumption patterns are small. A2.2 WOMEN'S EMPOWERMENT There has been no systematic cross-cultural or inter-organisational comparison of relative gender impacts of different models or strategies of micro-finance on the scale of the comparative assessments of poverty. The most detailed studies have been done in Bangladesh and these are currently contested on conceptual, methodological and analytical grounds. Most studies in Latin America, where there is any consideration of gender at all, confine themselves to questions of access or more rarely to go to sleep the activities in which women are involved (eg Berger and Buvinic 1989; Almeyda 1996; UNIFEM 2000). The CGAPsponsored AIMS studies do not currently contain detailed information on women's empowerment, despite the commissioning of Chen's framework (Chen 1996 ( see Poverty Elimination and the Empowerment of Women on this site) and some use of participatory techniques. Most other documented studies are short gender-impact assessments commissioned by NGOs and donors which use a diversity of indicators. Most contain limited information on empowerment beyond questions about increased confidence, control over loans, loan use and more rarely control over income in the household. What follows summarises findings of a very diverse secondary source and largely unpublished literature and the authors own exploratory research which is discussed in more detail elsewhere6. It is clear that many programmes have made a considerable contribution to individual economic empowerment for some women. For the very poor women savings and credit may be crucial to their very survival and enable them to enjoy some dignity within their communities. The benefits however go beyond poverty reduction and reduction in vulnerability to contribution to the broader empowerment process:
Most programmes have at least some cases of very poor women who have been able to set up or expand successful enterprises and who control use of this income, contributing to both their own well-being and that of the household. Successful enterprises are more common for less poor women and some women have succeeded in using credit over time to set up substantial businesses. Savings and pensions provide women with a means of building up an independent asset base on which they can call in times of need, giving them a stronger negotiating position within the household. Women themselves often value the opportunity to be seen to be making a
See Kabeer 1998, 1999 and Mayoux 1998c, 2000e for overviews of some of these debates. The various frameworks used are given in the paper on Poverty Elimination and Women's Empowerment (http://www.enterprise-impact.org.uk/EDDandTSPs.htm)
EDIAIS: Application guidance note, Oct 01 greater contribution to household well-being through accessing loans, savings, insurance and increased income. This gives them greater confidence and sense of self-worth.
In some cases women's increased contribution has led to positive changes in relations with male family members because of decreased pressure of poverty. Where husbands have been sympathetic they have taken on domestic tasks and domestic violence has decreased. Some women, encouraged by their own success and gaining greater respect in their households and communities, have become local leaders in community and political structures.
There may have also been wider changes as changes at the individual, household and community levels are interlinked:
individual women who gain respect in their households may then act as role models for others leading to a wider process of change in community perceptions and male willingness to accept change in societies like Sudan and Bangladesh where womens role has been very circumscribed and women previously had little opportunity to meet women outside their immediate family there have sometimes been significant changes.
Micro-finance has been strategically used by some NGOs and by women themselves as an entry point for wider social and political mobilisation of women around gender issues, including domestic violence, male alcohol abuse, dowry and treatment of women in the informal sector, eg SEWA www.sewa.org Nevertheless, despite its shortcomings the evidence indicates that all the assumed linkages between access credit and savings per se and empowerment need to be questioned. For some women micro-finance has been positively disempowering, as indicated by the cases in Box 3 which are far from isolated examples.
women's access to credit is still unequal in many programmes, credit unions and village banks. Although women are generally prominent amongst savers, loan amounts received by women are generally lower than those received by men and this cannot be completely accounted for by demand factors. There is evidence of continuing discrimination against women in access to larger individual loans. women do not necessarily use loans registered in their names for their own economic activity: Men may take the loans from women or women may choose to invest the loans in men's activities. Loans may be repaid from male earnings, through women forgoing own consumption, or from income or borrowing from other sources7. High demand for loans by women may be
In Bangladesh one study revealed approximately 50% of loans taken by women were used for men's productive activities, while another significant proportion were used for activities where
EDIAIS: Application guidance note, Oct 01 more a sign of social pressure to access outside resources for in-laws or husbands than empowerment. Women may not even have participated in the process of applying for loans in their names. Men may simply negotiate loans with male programme staff as an easier way of getting access to credit.
impact on incomes is generally small, and in some cases negative.8 All the evidence suggests that most women invest in existing activities which are low profit and insecure and/or in their husbands activities. For many very poor women decreases in household vulnerability may not have been captured in the studies and may be as important as actual increases in income. Nevertheless, many women interviewed in the author's own research were aiming for significant increases in their own income which they could control. In some cases, as for men, lack of impact on incomes is low because of badly designed programmes: inefficiencies in credit delivery or inappropriate repayment schedules. For women choices about activity and their ability to increase incomes are also seriously constrained by gender inequalities in access to other resources for investment, responsibility for household subsistence expenditure, lack of time because of unpaid domestic work and low levels of mobility, constraints on sexuality and sexual violence which limit access to markets in many cultures. There are signs, particularly in some urban markets like Harare and Lusaka, that the rapid expansion of micro-finance programmes may be contributing to market saturation in female activities and hence declining profits. there is not necessarily any challenge to gender inequalities within the household even where women contribute to increased income going into households. Womens perceptions of value and self-worth are not necessarily translated into actual well-being benefits or change in gender relations in the household. Worryingly, in response to womens increased (but still low) incomes evidence indicates that men may be withdrawing more of their own contribution for their own luxury expenditure. Men are often very enthusiastic about womens credit programmes, and other income generation programmes for this reason, because their wives no longer nag them for money . Small increases in access to income may be at the cost of heavier workloads, increased stress and their health. Womens expenditure patterns may replicate rather than counter gender inequalities and continue to disadvantage girls. Without substitute care for small children, the elderly and disabled, and provision of services to reduce domestic work many programmes reported adverse effects of womens outside work on children
control was ambiguous such as consumption or stocking and resale of goods or on-loaning for interest (White, 1995). In Goetz and Sengupta's study of 275 women they found that women had full control of loans in only 17.8% of cases and in as many as 21.7% they had no control. A survey of 26 women in SCF Bangladesh found that 68% of loans had been used by the husbands or the sons (Basnet, 1995). In Harpers study of AKRSP out of 31 micro-enterprise loan- takers interviewed only 7 loans were controlled by women and 16 were used by men and women had not been involved in the loan-taking process. In a further 8 cases women did not even know the loan had been taken (Harper, 1995). In BRAC 10% female respondents reported no personal income and the women relied on family and friends for weekly cash repayments.(Montgomery et al 1996) Male appropriation of loans was also noted for Port Sudan (Amin, 1993) and three ACORDUganda programmes (ACORD, 1996). Similar problems were reported by the number of programmes attending the Central America workshop. 8 see for example Hulme and Montgomery, 1994; Montgomery et al, 1996.
EDIAIS: Application guidance note, Oct 01 and the elderly. Daughters in particular may be withdrawn from school to assist their mothers. Although in many cases, womens increased contribution to household well-being has considerably improved domestic relations, in other cases it intensifies tensions.
there is no necessary link between womens individual economic empowerment and/or participation in micro-finance groups and social and political empowerment. womens increased productive role has also often had its costs9. In most programmes there is little attempt to link microfinance with wider social and political activity and in the absence of specific measures to encourage this there is little evidence of any significant contribution of micro-finance. There is evidence to the contrary that microfinance and income earning may take women away from other social and political activities and that micro-finance groups may put severe strains on women's existing networks if repayment becomes a problem.
The evidence therefore indicates that contributions of micro-finance per se to womens empowerment cannot be assumed and current complacency in this regard is misplaced. In many cases contextual constraints at all levels have prevented women from accessing programmes, increasing or controlling incomes or challenging subordination. Where women are not able to significantly increase incomes under their control or negotiate changes in intra-household and community gender inequalities, women may become dependent on loans to continue in very low-paid occupations with heavier workloads and enjoying little benefit. Credit (ie debt) may lead to severe impoverishment, abandonment and put serious strains on networks with other women. Pressure to save may mean women forgoing their own necessary consumption. The contribution of microfinance alone appears to be most limited for the poorest and most disadvantaged women. All the evidence suggests these women are the most likely to be explicitly excluded by programmes and peer groups where repayment is the prime consideration and/or where the main emphasis of programmes is on existing micro-entrepreneurs. It also suggests that they may be particularly vulnerable to falling even further into debt. Existing impact assessments and the authors own anecdotal exploratory investigation also point to the need to question some of the current skepticism regarding the necessity and possibility of assessing the impact of micro-finance on womens empowerment. They reinforce the points made in the discussion of poverty above about the necessity to:
go beyond consideration of income impacts to distinguish between household level and individual level impacts distinguish between different groups of poor people. But this requires
For example in Zimbabwe and Zambia women interviewed by the author said that nowadays if women did not earn sufficient income their husbands would divorce them. Although women valued their limited financial independence men expected women to provide for the household and men continued to play little role in domestic work. A report on ZAMBUKO in Zimbabwe found that women had to hide money from their husbands who would otherwise use it to pay bride-price to acquire more wives or to drink (World Bank, 1997).
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EDIAIS: Application guidance note, Oct 01 going beyond simple sex-disaggregation to look at different groups of women, and also to go beyond simple separation of female-headed households. These may be of very different types from elderly widows to young unmarried mothers who have very different problems, status and micro finance needs.
look at wider impacts on markets and communities. Microfinance programmes have cumulative impacts, both positive and negative, on womens roles, perceptions of appropriate gender roles including perceptions of mens responsibilities towards their families.
Although assessing impact on power relations within households and communities requires going beyond simple quantifiable calculations, useful indicators can be developed and it is possible to quantify some types of impact eg numbers of women buying land or house sites in their own names, numbers of women helped to become community representatives. Problems of measurement, attribution and so on are similar, but not necessarily greater, for womens empowerment than attempts to assess household level vulnerability or impacts on household livelihoods. In the authors research in Cameroon it was in fact much easier for women to state clearly what they wanted in terms of empowerment (their own income and increased say in the community) than poverty indicators (given the problems of comparing different types of land access and productivity). Any difficulties point to the need to develop more refined methodologies for integrating quantitative, qualitative and participatory methods for assessing impact on womens empowerment. As poverty reduction and womens empowerment are intimately interlinked (Poverty Elimination and the Empowerment of Women on this site)it is difficult to see how any credible assessment of poverty impacts can be made without looking at gendered power relations.
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Fig.2 VIRTUOUS SPIRALS : QUESTIONING ASSUMPTIONS
SAVINGS AND CREDIT
ECONOMIC EMPOWERMENT
?MEN MAY TAKE LOAN REPAYMENT WOMEN'S DECISION ABOUT SAVINGS AND CREDIT USE
INCREASED WELLBEING
?DIVERSION OF LOAN ?WOMEN MAY GIVE TO MEN
?MEN MAY WITHDRAW THEIR INCOME CONTRIBUTION
WOMEN'S MICROENTERPRISE
SOCIAL AND POLITICAL EMPOWERMENT

?MAY HAVE LITTLE IMPACT ABILITY TO NEGOTIATE CHANGE IN GENDER RELATIONS
WOMEN'S DECISIONS ABOUT CONSUMPTION ?WOMEN'S DECISIONS MAY REPLICATE GENDER INEQUALITY
?INCOMES MAY BE LOW
INCREASED INCOME
?MAY REINFORCE EXISTING ROLES
IMPROVED WELLBEING OF WOMEN
?MEN MAY CONTROL INCOME INCREASED STATUS AND CHANGING ROLES
INCOME UNDER WOMEN'S CONTROL IMPROVED WELLBEING OF CHILDREN ?WOMEN MAY USE UNPAID FAMILY LABOUR
WOMEN'S NETWORKS AND MOBILITY
?WOMEN MAY NOT WORK FOR WIDER CHANGE
IMPROVED WELLBEING OF MEN
INCREASED WAGE EMPLOYMENT FOR WOMEN
WIDER MOVEMENTS FOR SOCIAL AND POLITICAL CHANGE
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BOX A2.1: WOMENS EMPOWERMENT AND MICRO-FINANCE: SOME PROBLEMATIC CASES

GRAMEEN BANK, Bangladesh: Bahar Bahar was brought up in a Conservative family and always observed purdah. The household owned more than two acres of arable land and Bahar does not qualify for Grameen loans. But, within three to four years of the Bank's operation of the village, a couple of women from neighbouring households owning arable land, who also officially did not qualify, joined the bank and received loans. After that Bahar's husband insisted that she join the Bank and get money for him. Bahar refused. Finally, when insults and other pressure had failed, her husband warned her that if she did not join the Grameen group he would send her back to her natal home and he would remarry. In 1989, Bahar joined the group and received her first loan. Until 1993, when her husband migrated to Libya as a manual labourer, the husband used her loans. Now Bahar gives her loans to her brother in a distant village who invests the money in his business and gives a share of the profit to Bahar at the end of each year. Bahar pays the regular weekly instalments from her husband's remittance. ' (Rahman 1999) BRAC, Bangladesh: Shiuli is 22 years old but looks much older. She is married and had children at an early age. At first she had a good relationship with her husband who was a rickshaw mechanic. In 1993 she took a loan from BRAC and gave the money to her husband to improve his business. However her husband lost much of the money to gambling. She became worried about the loan repayment and in 1995 was only able to repay the loan by selling the tin roof of her house. Then her husband left the village and went to Dhaka where he married another woman.(Khondkar 1998) WORLD VISION-BOTSWANA: Violet Makgosa runs a poultry business. She built a poultry house in her yard, as many of her colleagues have done, and began to travel around the villages to sell her chickens. She deposited all the money she made from her sales, except for her salary. Although her husband tolerated the first few market and bank trips, he was not happy about her going around nor depositing the money in the bank: he wanted her to stay at home, and to use at least part of the business savings. One day Violet went to a road camp in a nearby village to sell chickens. She did not finish selling them, and in order to save transport money she decided to spend a night there and sell the rest the following day. When her husband came home and did not find Violet he was furiously angry. The next day, having sold all her chickens Violet returned home happy and encouraged. As soon as he saw Violet, her husband told her she had to choose between him and her chickens. She chose the latter and went to her parents. However, she later reported the matter to her World Vision Centre members who negotiated with her husband on her behalf and reconciled them. Now the husband has accepted Violet's market and bank trips and the fact that she deposits her business revenue for future expansion.(Getu 1996) Uganda Womens Finance and Credit Trust: Edith Kagino married, with seven children. Before marriage, she developed an interest in dairy helping her mother. After marriage she worked in her husbands workshop. From 1991 she was a regular saver with UWFCT and acquired a loan in 1992, for two in-calf heifers and for the construction of a small cow shed. She planted napier grass to feed the cows. Edith started off very well, with the first cow calving normally. Problems started when her husband instructed her to go back to his workshop. She could no longer take care of the cows, and eventually she lost one of them. Despite her protestations, her husband insisted that she remain in the workshop. Eventually her husband chased her away from her home and she had to find shelter for herself and the children. The husband claimed the cows as his so she was not allowed to take them. After some months, with the help of in-laws, the husband called her back. But he had already sold the roofing sheets and construction materials of the cowshed and all the grass was gone. She got pregnant
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again, then her husband decided to live with another wife. Edith is recovering from the shock, trying to start again. Her project is marked as a doubtful debt.(Ngajja et al 1993)
A2.3 ENVIRONMENT Environmental impact assessment of micro-finance is a recently emerging concern with some major donor agencies, notably CIDA10. Sound environmental management is an essential component of poverty reduction (See EDD and TSPs Achieving Sustainability: Poverty Elimination and the Environment). It is essential to the sustainability of incomes and livelihoods. It is the very poor who suffer most from environmental degradation and environmental hazards including pollution, poor sanitation and water management and depletion of fuel, fish stocks and other resources. Because of the gender and age division of labour and inequalities women and children are frequently the ones who bear the brunt of resource depletion in the form of time spent getting fuel and water, house cleaning and so on. Men as well as women and children also suffer ill-health from employment in industries with bad environmental health and pollution records. This both harms their income earning capacity and causes a major drain on household budgets for health care. Methodologies for environmental impact assessment of micro-finance are currently being developed for participatory assessments building on established methods for community environmental planning (See Box 5). However impacts have not so far been quantified and evidence is currently largely anecdotal. Nevertheless it is clear that microfinance has the potential for both positive and negative environmental impacts through its encouragement of expansion of particular types of agricultural production, enterprise and/or consumption. Where environmental considerations are not taken into account there may be a range of negative environmental impacts including:
increasing numbers of cattle or goats purchased with livestock loans leading to over-grazing increased use of pesticides purchased with loans increase in numbers of polluting enterprises like tanneries, silk-reeling units, dyeing units, metal working purchase of polluting transport like autorickshaws and taxis agriculture encroachment in nature reserves wasteful consumption patterns
10
Some work has been done by Dean Pallen at CIDA on studying impacts and management solutions (Pallen 1996, 1997, 2001 available through Microfinance Virtual Library: http://www.gdrc.org/icm/environ/environ.html. The author is also grateful to Abhisek Lal abhishek_lal@hotmail.com a consultant working on environmental issues in micro-finance for some of the information given here.
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EDIAIS: Application guidance note, Oct 01 These impacts may be caused either by factors intrinsic to production or consumption processes themselves and/or by underlying factors like uncertainty of land tenure, inadequate health and transport infrastructure, gender inequalities in access to resources for development of environmentally sustainable technologies.
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EDIAIS: Application guidance note, Oct 01 APPENDIX 3: WHAT IS MICRO-FINANCE: DIMENSIONS OF VARIATION AND CURRENT INNOVATIONS A3.1 WHY MFIs? MICROFINANCE SERVICES IN THE INFORMAL AND FORMAL SECTORS Microfinance services are not new, but have always existed. All the evidence suggests that poor people will continue to need and use these informal services alongside those of externally-supported microfinance interventions. In some cases support for separate specialist microfinance institutions or NGO microfinance programmes is not necessarily the best or only type of microfinance intervention for poverty reduction. Analysis of these informal, private sector and formal sector arrangements must therefore be a central part of any impact assessment. An increasing body of research has shown the considerable sophistication and diversity of informal and private sector mechanisms and arrangements which exist11.
Mutual arrangements include Revolving Savings and Credit Associations, informal funeral insurance. Private sector arrangements include informal lending between acquaintances, livestock share arrangements and trade credit. There are also often private microfinance specialists including free or peripatetic savings and credit collectors, money lenders, traders and landlords.
These informal and private sector arrangements vary in:
degree of security of savings, insurance and pension deposits. Although ROSCAs and private microfinance specialists often offer good levels of security, cases of fraud and misappropriation of funds are by no means unknown12 accessibility to very poor or particularly disadvantaged people. Access may depend on references from reputable family members. In some cases arrangements only exist between people of the same ethnic group. Some mutual arrangements are segregated by sex and women may be disadvantaged in access to private sector providers. Flexibility and accessibility of funds although money lenders often offer flexible services, other sources may be less accessible. In ROSCAs for example savings regimes are inflexible and access to loans may not be at the time most advantageous for the borrower.
11
See particularly Rutherford 1996, 1999. For ROSCAs see eg Ardener and Burman 1995 and detailed references therein. 12 This is dealt with in detail in "The Relative Risks to Poor People's Savings" by Graham Wright which can be downloaded from the new MicroSave-Africa website: www.MicroSave-Africa.com
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costs are highly variable. In mutual arrangements interest rates on loans may be very high in order to earn money for savers. Private sector arrangements range from interest free arrangements to high interest rates depending on the nature of the relationship between borrower and lender. Relationships range from relatively egalitarian relations whereby poor women may lend to others through to highly exploitative debt bondage. In some cases women may be charged higher interest rates than men and/or offered other less advantageous conditions including sexual harassment and highly exploitative arrangements for domestic service.
It cannot be assumed that microfinance institutions will necessarily be able to provide better services than those already available and/or fulfil the diversity of needs which poor people have. It is crucial to ensure that externally-supported microfinance interventions integrate with and complement existing arrangements rather than displacing or undermining them. There may be ways of stimulating and supporting informal sector microfinance provision working with informal sector providers to increase their access to capital, increasing efficiency and developing networks in order to decrease interest rates and/or improve the services they provide. Some programmes have been working through existing ROSCAs. There may also be ways of increasing the amounts of credit channelled through small-scale local moneylenders, many of whom are themselves poor women but who lack the necessary capital to expand their operations. In some countries the formal sector provides services which are extensively used by poor people, particularly the better-off poor. Many people, including women, use Post Office savings facilities in countries where these are accessible and reliable. In some countries, for example India, substantial funds have been targeted to poverty reduction. From the point of view of users loans are often cheap and savings facilities secure and cost-effective. There are however problems of:
accessibility and corruption: where various types of patronage and bribery are extorted to get access to poverty-targeted funds. Discrimination of various types, particularly against women and disadvantaged ethnic groups is commonplace. inefficiencies or shortcomings in delivery: where for example loans are one off payments delivered at the wrong time and/or only available for certain purposes
From the point of view of donors there have been serious problems of:
sustainability: services have been generally subsidised and loan repayments have frequently been very low. This is partly a problem of the costs of delivery to very poor people and also the common use of access to subsidised loans as a form of political patronage.
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EDIAIS: Application guidance note, Oct 01 None of these shortcomings are confined to government-sponsored poverty alleviation credit. In Bolivia, for example, when private sector banks entered the micro-finance sector following the evident profitable success of MFIs like Banco Sol the effects were disastrous (Rhyne 2001). Even where formal sector services are currently inadequate, there may be ways of reforming the formal sector and/or supporting partnerships between MFIs, NGOs and/or formal sector banks and other financial service providers. For better-off poor entrepreneurs, including many women, needs may be better met by linking with formal sector banks to access larger sums of money and expertise required for business development. Here staff training and/or credit guarantees for the formal sector could be a useful intervention. In the case of insurance there is also very strong case for partnership between NGOs and formal sector institutions. In some countries, notably India, there is increasing success in developing methodologies for partnership between NGOs and banks to deliver loans to very poor women. It is important that the increasing availability of small loans from female-targeted MFIs does not detract attention from the continuing need to reform gender discriminatory practices and/or develop more user-friendly and cost-effective methodologies for poverty-targeted finance in the formal sector. Both these areas are currently subjects of debate in many developed countries including the UK. There is an increasing public expectation that private sector banks should conform to ethical principles and make a development contribution to the national economy. It is therefore important that similar principles underlie DFID support for the formal sector. A3.2 MICROFINANCE INSTITUTIONS: DIMENSIONS OF VARIATION Micro-finance institutions are very diverse and the sector is currently undergoing a period of rapid innovation. While many of these innovations can intuitively be expected to increase the contribution of micro-finance to poverty reduction, empowerment and other development goals, impact assessment will be crucial to testing this. There are a number of commonly recognised distinct categories of MFI13 which are in many countries governed by separate legal statutes and regulations (See Box A3.1):
specialised registered professional microfinance providers or development banks

village banks registered cooperatives and credit unions
13
In this paper the term MFI is used generically to refer to all these types of institution which offer microfinance services on whatever scale and which are not fully covered by formal regulation of the banking sector. Where (as is the usage of some other authors) reference is only to the large specialist microfinance providers this is made explicit.
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development NGOs and micro-finance intermediary facilitators
Until recently it was the first two which received most attention in microfinance debates, partly because of sustained international lobbying on behalf of a number of prominent microfinance networks like ACCION, FINCA and Grameen Bank/Grameen Trust which succeeded in persuading northern donors to take microfinance seriously as a poverty reduction strategy. More recently there has been increasing interest in the potential of credit cooperatives and credit unions. 14 In some countries like India where there has been responsive formal sector, there has been extensive development of intermediary NGO models linking savings and credit groups with banks. The legal categories are crosscut by other dimensions of variation which are likely to be more significant from the point of view of both microfinance users and financial sustainability as also summarised in Box A3.1. Importantly the formal categories do not capture the many interesting innovations currently being developed. Impact assessment will therefore need to go beyond comparison of these broad legal categories (See Box A3.2). Firstly there are differences in organisational mandate. As discussed in detail by the author and others elsewhere, it is possible to distinguish a number of distinct ' paradigms 'of microfinance which have different aims, different understandings poverty reduction and/or empowerment, different target groups and different policy emphases. 15 Some microfinance institutions aim only to deliver an efficient financial service to clients/members. This is true of many member-owned credit unions and cooperatives and some microfinance banks. Others have an explicit commitment to poverty targeting and/or poverty reduction. Yet others have evolved out of women's organisations (eg SEWA in India www.sewa.org) and/or have organisational gender policies including both gender strategies for members/clients and equal opportunities policies for staff. Examples include Opportunity International (www.opportunity.org.uk), programmes sponsored by ACORD (www.acord.org.uk) and Southern NGOs (eg CODEC). Typically many microfinance institutions are currently attempting to balance and resolve tensions between a range of different development goals. This includes recent considerations of the ways in which micro-finance can contribute to environmental management, development of health care services, education and housing programmes. Secondly there are differences in target group. In the 1960s and 1970s the main focus of poverty-targeted credit was on agricultural credit for male farmers. In the 1980s, partly as a result of extensive lobbying by gender advocates in donor agencies like USAID and women's organisations like SEWA in India in the context of the International Decade for Women, attention came increasingly to focus on female entrepreneurs and micro-enterprise. This focus was reinforced by experience of better repayment rates of female borrowers in many large programmes like Grameen Bank and FINCA which have increasingly targeted
14 15
The ILO in particular has been interested in promotion of credit unions, see ILO website. A number of authors have distinguished between As discussed in detail by the author there is also a third (and even older) women's empowerment paradigm which underlies microfinance activities of many women's organisations.
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EDIAIS: Application guidance note, Oct 01 women. Towards the end of the 1990s there has been increasing recognition of the diverse situations of poor people and the diversity of microfinance needs which go beyond credit for productive activity. Attempts are beginning to be made to develop services for new target groups including the ultra-poor, the disabled, children, the elderly, agricultural and migrant and bonded labourers Thirdly there are differences in scale, ownership and management structures. Member-owned credit unions and cooperatives range from small self-managed and owned groups federated into Apex organisations to banks where client participation in decision-making is minimal or non-existent. Some Grameen replications have structures for client representation. To some extent levels of participation are linked to scale in that client or member representation and control over programme assets (even where they have legal ownership) are more complex in large organisations. It is also important to point out that scale is not necessarily correlated with either financial sustainability or success. Although scale is important for insurance operations, relatively small organisations can be financially sustainable, target the poor and make a significant impact on women's empowerment Fourthly there is an almost infinite variety in the type and mix of microfinance service and conditions of delivery: in some countries credit and savings providers are closely regulated and NGOs cannot access deposits. In other countries rules are more relaxed. Some MFIs focus on loans, others have large savings deposits and shares, some provide insurance and/or act as insurance or pensions brokers. Recent innovations include a range of new products: new loan packages, savings facilities, insurance and most recently pensions. The specific conditions eg voluntary/ compulsory savings or insurance, repayment schedules, interest rates and so on vary significantly, even between schemes in the same organization. Some MFIs use individual methodologies, others group methodologies, yet others combine the two for different target groups or products. The nature of group sanctions, types of support and role vary considerably. The precise details of conditions of delivery are likely to be crucial in affecting impact and there are many ways of addressing poverty reduction and empowerment aims without undermining financial sustainability. Where broader development aims are not explicitly taken into account as an integral part of programme design, many of the ways in which attempts are made to increase financial sustainability will have negative impacts16. Fifthly microfinance programmes differ in the types of complementary service they offer. This is partly because of historical differences in their origins with many having developed out of NGO development organisations. In the 1990s there was increasing pressure from donors to separate microfinance from other activities, and even to focus on minimalist microfinance. This is partly because of evidence of marginal impact of many training programmes and their high costs. Recently, however, attention has increasingly focused on the ways in which microfinance can be cost effectively integrated with other types of service and/or link clients with other service providers. This parallels debates about the need for Business Development Services and the appropriate form which these should take. A number of programmes are now experimenting with ways in which
16
See for example CODEC in Bangladesh.
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EDIAIS: Application guidance note, Oct 01 complementary services can be delivered more cost- and impact-effectively for example through group-based training/learning systems (e.g. as in CARE-Niger) and integration of savings and credit with other services (eg as in CODEC and BRAC in Bangladesh). There has also been increasing debate about the best ways of integrating gender awareness and challenging gender equality.
BOX A3.1: TYPES OF MICRO-FINANCE INSTITUTION: ORGANIZATIONAL MODELS AND DIMENSIONS OF VARIATION ORGANIZATIONAL MODELS Poverty-focused Development Banks registered Banks where professional staff access and decide on administration of their own independent fund for on-lending to individuals or groups. This includes Grameen, ACCION and Trust Bank models and also SEWA and many Womens World Banking affiliates. Village Banks: where loan funds are provided by an external agency to a local community-based organization which may or may not be registered. The entire banking function and transactions are managed by the CBO which may set up committees for monitoring and approving loans. This includes the FINCA model. Thrift and Credit Co-operatives (TCCs) and Credit Unions (CUs): formal registered membership organizations governed by state legislation formed by groups of people who have a common bond (eg live in the same community, work in the same establishment etc) and agree to save money together and lend it to one another at low rates of interest or use it for a shared purpose or project. Members own all the assets of the groups. TCCs or CUs often come together into Apex organizations and Federations with elected officers and/or salaried staff to increase assets and influence. These may be initiated by and/or receive funds from external agencies. Intermediary programmes: NGOs facilitating linkages between grassroots groups and the formal financial system. They provide referrals, assistance with applications, training, technical assistance and guarantees to the service providers which reduce the implicit costs and risks of poverty-targeting. They may also assist service providers in product design. They may charge a fee from both service recipients and providers and/or be supported by other funds. DIMENSIONS PROGRAMME:
OF
VARIATION
IN
MICRO-FINANCE
Ownership and management structure: from small selfmanaged and owned groups federated into Apex organisations to 21
EDIAIS: Application guidance note, Oct 01 banks where client participation in decision-making is minimal or non-existent.
Organisational mandates reduction and gender policy.
including
approach
to
poverty
Types of delivery methodology: including individual delivery and different types of group structure and function Type and mix of microfinance service and specific conditions of delivery of complementary service: general training and awareness for individuals and group operation (including gender awareness), business and skills development-related services, financial and legal support (including advocacy), infrastructure and welfare support
Types
BOX A3.2 SOME AREAS OF RECENT INNOVATION NEW PRODUCTS Credit Targeted loans for health, education and housing: some programmes including SEWA and Grameen Bank offer large longer term loans for specific types of consumption like housing, education (including girls education). In the case of Grameen it is a requirement that house sites be registered in womens names, both as security for the loan and to increase womens control over assets.
Loans for environmental improvement SEWA and some other organizations have been working with waste recyclers like paperpickers and garbage collectors to improve their efficiency and incomes. CIPCRE in Cameroon promotes environmentally sustainable integrated agricultural and pastoralist production. Conservation International uses microcredit as a tool to contribute to conservation and development around nature reserves through requiring loan recipients to farm according to certain sustainable agriculture standards.
Flexible loan repayment schedules to enable borrowers to better integrate loan repayment with income availability patterns without increasing indebtedness.
Savings Safe-Save in Bangladesh has developed a methodology for completely flexible individual savings and loans for very poor women.
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EDIAIS: Application guidance note, Oct 01 Insurance SEWA in India has had a health insurance programme since 1992 BRAC has started Grameen Kalyan (Welfare), an 11-site health program based on an insurance premium of about $3 per year per family, and copayments made at the time of receiving treatment. It now recovers about 70% of its costs, and is hoping to reach the break-even point over the next few years, and then go nationwide. The ILOs Social Finance Unit, supported by the World Bank, is creating an experimental reinsurance scheme for community-based health insurance schemes.
Pensions: Some Indian MFIs are in dialogue with Life Insurance Corporation to adapt their pensions products to the needs of poor women. Anna Poorna Mahila Mandal in Bombay for example is running a savings and credit co operative for urban poor women and has devised a scheme whereby women mobilise their small savings and once the amount reaches Rs. 5000 (about 105$) the amount is invested in the LIC pension scheme. The amount is invested by LIC in sound securities and doubles every six years and after 20 years amounts to Rs.50,000. On this principle amount a fixed amount of Rs. 500 per month is paid to the woman as old age pension. The principal amount of Rs. 50,000 can be paid to her nominee at the time of her death and the nominee is not eligible for the amount if her death is not natural. Thus it ensures that the old person is looked after by the nominee in her old age. For details see www.licindia.com or write to AMM at amm1@vsnl.com SEWA Bank has a pension product but it is related to the savings scheme ASSEFA an NGO in South India is experimenting with a pension fund for women participants in their "Dairy credit scheme" based on the amount of milk sold. For further details contact Mr; Loganathan, Managing Director at assefa@md2.vsnl.net.in FAULU in Kenya, a medium size MFI, has held discussions with the local subsidiary of AIG. They have offered the opportunity for FAULU clients to start small individual pension schemes, with small timely remittances. For further details contact Gerald Macharia, FAULU. New types of client The ultra-poor: some organizations are developing special programmes for the ultra-poor eg BRACs Programme for the Ultra-Poor (PUP). Elderly: Help Age - India has recently started a programme for the Senior Citizen. For details see website www.helpageindia.org or contact Director, Help Age India, C- 14 Qutab Institutional Area, New Delhi. Children: Save the Children has been experimenting with savings products for children. Agricultural labourers and employees: ILO is looking at micro-finance facilities for bonded labour. Disabled: Some organizations working with the disabled have micro-finance schemes.
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EDIAIS: Application guidance note, Oct 01 New institutional arrangements (case studies forthcoming)

Building on the informal sector Linking with the formal sector Gender policy Opportunity Trust Microfinance and peoples movements
A3.2 CURRENT INNOVATIONS IN GENDER POLICY Microfinance programmes do have a potentially significant contribution to a number of critical dimensions of a broader process of women's empowerment, in particular: significantly increasing incomes from womens own activities and increasing choice of these activities enabling women to control (have a choice over use of) income from loans and activities generated by loans enabling women to negotiate improvements in their well-being within the household giving women access to support networks and an acceptable forum which enables them to organize to protect their individual and collective interests at the local level providing an organisational basis for programme lobbying and advocacy to promote gender equality at the macro level. There have undoubtedly been considerable advances in recent years in increasing womens access to micro-finance. There have been a series of manuals produced by donors (eg Binns 1998, UNIFEM1993, 1995) and many of Rhyne and Oteros recommendations themselves are designed to facilitate womens access. However the findings of existing impact assessments (See Appendix 3) indicates that the potential contributions to empowerment are not an automatic outcome of access to micro-finance per se, but are likely to depend also on other features of programme design. Some MFIs have recently been developing more comprehensive gender policies eg Zambuko Trust). A series of workshops facilitated by the author and funded by DFID and other donors between 1997 and 2001 have indicated a number of essential elements of a gender strategy which would increase not only womens access to microfinance but also womens empowerment (See Box A3.3). These are discussed in detail elsewhere on the EDIAIS site (see EDIAIS Poverty Elimination and the Empowerment of Women).
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EDIAIS: Application guidance note, Oct 01 BOX A3.3: ESSENTIAL ELEMENTS OF AN EMPOWERMENT STRATEGY DEFINITION OF EMPOWERMENT: the process through which women achieve equal rights, power and resources. UNDERLYING PROGRAMME VISION TO FOCUS ON EMPOWERMENT womens equal access to micro-finance and employment to be seen as a human rights issue and an integral part of any mainstream regulatory and policy framework separation of gender from poverty concerns with explicit strategies for addressing gendered resource and power inequalities within households and communities and explicit strategies for the most disadvantaged women from women to gender: women's empowerment requires not only strategies targeting women but also strategies targeting men gender policy to focus explicitly on womens empowerment throughout programme design from compartmentalized interventions to integrated and interlinked strategies including attention to reproductive work, social welfare and empowerment as integral parts of any economic intervention CONDITIONS OF MICRO-FINANCE DELIVERY to be flexible to womens aspirations and strategies and promote empowerment eg. repayment schedules and interest rates to maximise impact on incomes registration of assets used as collateral or purchased with loans in womens names or in joint names and applicable in both loans for women and men incorporating clear strategies for womens graduation to larger loans 'multiple choice' options based on participatory consultation including loans for new activities, health, education, housing etc range of savings facilities which include higher interest deposits with more restricted access loans to reinforce and strengthen male responsibilities for household well-being, including that of their wives and daughters e.g. loans for daughters education COMPLEMENTARY SERVICES: to include explicit attention to gender, in particular: integration of gender awareness into all training programmes and design of all complementary services for women and men gender specific services for women eg training/mutual learning for women to increase organizational as well as business skills, legal aid support. services for both women and men: services to reduce burden of unpaid domestic work, including childcare. GROUP FUNCTIONS AND STRUCTURES as a structure for mutual learning and information exchange as a basis for collective action by women organizing male support for change in gender relations. ORGANIZATIONAL GENDER MAINSTREAMING to provide the organizational context for a focus on empowerment equal opportunities policies for staff as a human rights issue, to set an appropriate example to programme participants and to increase programme effectiveness in 25
EDIAIS: Application guidance note, Oct 01 reaching and empowering women gender and empowerment awareness for men and women to include an empowerment perspective throughout the programme interactions with programme participants including all conditions of micro-finance delivery, all routine training and advice for both women and men and complementary services and all group activities concrete incentives for womens empowerment in programme implementation including incentives for women themselves, for male participants and male and female staff integration of empowerment indicators into existing programme MIS
INTER-ORGANISATIONAL LINKAGES: to increase contribution to empowerment and decrease costs of individual empowerment strategies linking with other service providers eg womens legal aid, training, gender research networking with other organizations challenging gender inequality, including womens own grassroots organizations and those of men
A3.4 INNOVATIONS IN ENVIRONMENT POLICY It is clear from existing impact assessments (See Appendix 3) that there is a need for much greater attention to environmental concerns in the design of microfinance products in order to increase their considerable potential contribution to DFID development objectives. As indicated in Box A3.4, there are ways in which micro-finance, particularly loans, could be used to encourage environmental improvement. In many cases increased efficiency in use of resources can decrease production costs and thus increase profits. Loans can promote enterprises dealing with waste collection, recycling, sanitation and crops which enhance biodiversity. Programs can also form an organisational structure for promotion of environmental awareness. BOX A3.4: ENVIRONMENTAL IMPACT: POLICY OPTIONS AND ASSESSMENT TOOLS ASSESSMENT TOOLS Environmental Impact Analysis (EIA) the practice of evaluating and anticipating the environmental impact of a project, identifying mitigation measures and, if necessary mapping out alternatives (Pallen 1997, p.13). For MFIs this will involve evaluating the impacts of the types of agricultural production, enterprise and consumption which are found to be expanded or decreased through availability of loans and/or other services.
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EDIAIS: Application guidance note, Oct 01 Loan Application Analysis: The loan application can be used to ask prospective clients about their activities. Application questions can be as simple as asking to describe general environmental effects of their enterprise to detailed questions separating issues of inputs, waste, location and so on. A UN sponsored enterprise development program used this method of loan application analysis in the West Bank and Jerusalem. Participatory Sub-sector Analysis (PSA) a tool used by MFIs (Pallen 1997, Chen 1996) to help entrepreneurs identify production inefficiencies. Many of these production inefficiencies are themselves sources of environmental degradation. This method can also be used to specifically focus on identifying processes that negatively impact on the environment and/or potential positive actions which could be taken. SOME POLICY OPTIONS Targeted loans: to increase security of tenure over land and house sites, preferential loans for promotion of environmentally friendly technology, enterprises and consumption like recycling and waste collection, environmentally friendly agricultural or manufacturing techniques, environmentally friendly house improvements or fuel and water saving domestic technology. Training/Environmental Awareness integrated into ongoing training and/or as special training sessions. Regulation through loan agreements: MFIs have the ability to influence (though not control) production and consumption activities funded by loans. Environmental management can be made part of loan agreements. For example Conservation International provides credit to small farmers working around a nature reserve in Costa Rica while requiring that activities be designed to be environmentally benign. This has helped to maintain the rich biodiversity of the nature reserve. Partnering/Building Networks with environmental NGOs and relevant government institutions to obtain information on environmental management techniques, provide environmental certification and marketing outlets for clients (eg organic status). In this way environmental NGOs would also benefit through having ready access to a broad clientele for dissemination. Source: builds on points in Lal 2001 and Pallen 1997.
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A3.5: MICRO-INSURANCE Vulnerability to risk is a key aspect of poverty. Health problems, death of livestock and natural disasters all affect the poor disproportionately. Micro insurance is essentially: a financial service which uses risk pooling to provide compensation to low income individuals or groups that are adversely affected by a specified risk or event (Brown 2001). In some contexts indigenous mechanisms for informal insurance exist.17 Vulnerability to risk affects not only poor people, but also MFIs dealing with them through their adverse impact on loan repayment rates and stability of savings deposits for MFIs. Since the end of the 1990s an increasing number of microfinance institutions have been trying to develop insurance products for their clients including:

health and life insurance18 livestock and crop insurance property insurance compulsory insurance against loan defaults
However although it is undoubtedly true that both poor people and poverty targeted MFIs need to decrease risk, micro-insurance is not necessarily the solution. Many MFIs run insurance programs that are worryingly close to illegality. In some cases this is because of an unfavourable regulatory environment, in others because MFIs are not well-equipped to run cost-effective and reliable micro-insurance schemes. Moreover insurance does not necessarily benefit poor people:
some MFIs promote badly designed insurance in order to supplement savings as a means of hedging a risky loan portfolio. Such schemes are likely to collapse taking all the premiums with them. many of the most serious risks eg floods, AIDS/HIV and other epidemics are so predictable and large scale as to be uninsurable at reasonable rates.
17
For example in South Africa poor people combine resources from ROSCAs, other informal savings and credit arrangements and insurance to cover costly funeral expenses (Roth 2001) 18 An example of health insurance is given in the Case Study of SEWA in India. There is also an expanding literature on this topic see eg McCord 2001 for an overview of NHHP/FINCA Uganda, UMASIDA, SEWA and GRET. Another example is BRACs Grameen Kalyan (Welfare) which has been implementing an 11-site health program based on an insurance premium of about $3 per year per family, and co-payments made at the time of receiving treatment. It now recovers about 70% of its costs, and is hoping to reach the break-even point over the next few years, and then go nationwide. The ILOs Social Finance Unit, supported by the World Bank, is creating an experimental reinsurance scheme for community-based health insurance schemes.
28
several private insurers, particularly in different parts of Africa, have become profitable by selling a good volume of policies to poor households. In many cases these new policyholders did not understand what they were purchasing or how to make a claim and did not therefore benefit from the schemes (Brown 2001).
There are also gender dimensions to these questions. For example, while it may be very important for women to be able to contribute to life and health insurance schemes for themselves and their husbands, insurance may not be the best solution where marriages are unstable. In this case women risk paying premiums, maybe out of their own consumption and investment funds, maybe to ensure loans which are used by men and then forfeit these premiums if they are unable to keep payments up following divorce and/or cannot claim on the death of ex-partners. Women have high levels of illiteracy than men and lower levels of physical mobility in many cultures and may therefore be less able to understand policy conditions and follow-up claims unless these factors are taken into consideration. Finally there are broader issues about the degree to which poor people should be required to take out insurance to decrease sources of vulnerability which should be met by public provision of health and welfare safety nets and/or employerfunded schemes. There are dangers that the availability of insurance may make private health practitioners increase charges and/or deny treatment to those without insurance. These issues are currently subject of considerable debate in Northern industrialised countries. There are also questions to be asked about whether very poor people should be bearing the costs of risks like flooding, natural disasters and epidemics or whether international agencies and governments should prioritise other ways of meeting these costs. The poorest and most disadvantaged are generally excluded from insurance provision. There is a serious dangers if promotion of micro-insurance is used as a pretext for decreasing public welfare provision, health and safety provision at work, donor funding in emergencies or pressure to address the underlying causes of disasters caused by factors like climate change. Key issues in current discussions have been the relative merits of different types of institutional arrangements:

direct provision of microfinance by specialist MFIs promotion of community-managed programs, including building on informal systems where these exist19 partnership between MFIs for community groups and formal insurance providers.
Both arrangements have advantages and disadvantages the balance of which will depend on the capacities of MFIs and formal insurance providers in any one
19
This is the approach favoured by organisations like ILO which see community-managed self-help as an important and essential complement to state provision of social welfare services. For further information see ILO web site http://www.ilo.org/public/english/protection/socsec/publ/index.htm .
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EDIAIS: Application guidance note, Oct 01 particular context and the specific needs and prevalent risks of particular target client groups. These are summarised in Box A3.7. BOX A3.6 MICRO-INSURANCE: CONSIDERATIONS WHAT IS INVOLVED? Actuarial analysis (pricing): managers need to be able to predict what future claims will be with a reasonable degree of accuracy to ensure that premiums are high enough to cover future claims. Insurance premiums also need to establish reserves to protect the insurer against unexpectedly high claims. Reinsurance ie the shifting of part or all of the insurance risk originally written by one insurer to another insurer is also used to limit risk in both new and established lines of business. Marketing: for a programme to be successful, the MFI must also educate prospective clients about the potential benefits and cost of the product and ensure that consumers know how to use it (e.g. how to make claims). Marketing of insurance is also less straightforward than credit or savings because clients must be willing to continue to pay premiums even when they are not receiving any direct benefits. Underwriting: the process of verifying whether insurance coverage should be provided to a particular potential policyholder. Typically this involves confirming that the potential policyholder meets the eligibility criteria determined by the MFI eg through documenting all illnesses existing when a health insurance policy is purchased. Investment management: the difference in time and value between receipt of premiums and payment of claims and expenses gives an insurance plan the opportunity to earn investment income. But this must be balanced with the need to maintain sufficient liquidity to meet claims and expenses. Claims management: verifying whether a claim should be paid out, weeding out fraudulent claims and ensuring that genuine claims are processed quickly. Product management and administration: co-ordination and communication among all of the above activities is crucial to the smooth operation of an insurance product. This requires effective IT and management systems. Regulatory compliance: Insurance regulations mandate that providers maintain substantial reserves, report regular financial results and have trained underwriting and sales staff. CRITICAL CONSIDERATIONS REQUIREMENTS AND CRITICAL
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Size of clientele: insurance works by sharing risk across the large population. Balance of risk/controls against adverse selection: risks covered by insurance should only be able to affect a relatively small portion of the total insured population at any given time. the pool of insured households should include both high- and low-risk cases so that the average risk occurrence is similar to the average in the population at large. Specified risks versus comprehensive coverage: there is an inherent trade-off between size of premiums and breadth of coverage and/or percentage of costs covered. Some policies only against specific risks for which the chance of loss can be calculated. Others give broader coverage but only pay a percentage of costs incurred by the client. Controls on moral hazard: policyholders ability to influence whether the risk actually occurs must be limited or controlled. These risks are especially high in the provision of health and property insurance.
BOX A3.7 ADVANTAGES AND DISADVANTAGES OF DIRECT MFI MICROINSURANCE PROVISION VERSUS PARTNERSHIP WITH FORMAL INSURANCE PROVIDERS DIRECT MFI MICRO-INSURANCE PROVISION Advantages A local MFI with a good understanding of its target group can design products that closely meet their clients needs
A local MFI with a longstanding and positive relationship with clients will be able to inspire confidence in a new insurance product and the ability to deal promptly and sensitively with claims.
Savings and credit groups may provide cost-effective delivery channels for both MFIs and clients, increasing coverage and promoting good relations to decrease false claims.
Costs Risks may be increased If the insurance side of the business is not separate from the savings and credit side massive insurance losses may cause insolvency in an otherwise successful savings and credit operation20.
20
For example banks in the USA and Canada cannot sell their own insurance policies. Regulators felt that combining the two functions would create a situation in which the managers of banks or insurance companies would have the ability to sustain one side of the business if the other side was performing badly. This could place savings or insurance benefits at risk. (Jimmy Roth E-mail contribution to devfinance listserve)
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The skills required to run micro insurance scheme are very different to those required for a lending and/or deposit taking institution. The skills involved in assessing credit worthiness (e.g. project appraisal, previous credit history assessment) are very different from those required to design and manage insurance schemes (e.g. setting premiums. forecasting losses, investing the fund safely).
Scale and client diversification are crucial in insurance schemes to protect against co-variant risk. Not all MFIs have sufficient clients. In Africa in particular MFIs often have only a few hundred members all located in an isolated, sparsely populated area.
access to insurance may increase moral hazard. For example a small scale cattle farmer will pay less attention to husbandry safe in the knowledge that should one of their cattle die that was bought on credit, the insurer will pay them out and they will be able to repay the loan. Insurance may also establish perverse incentives for MFI loan officers to be less careful in their appraisal of credit worthiness, if they know that insurance will repay them if their clients do not.
PARTNERSHIP WITH FORMAL INSURANCE PROVIDERS Advantages for the MFI: limited initial capital investment and low variable costs; rapid product launch and scaling up; compliance with legal and regulatory requirements; potential for stable revenue streams from commission; opportunities to learn the business and offer new product to clients and decrease risks of loan default without taking on the risks of insurance itself.
for the formal insurers: access to new markets; access to clientele with verifiable financial records; reduced transaction costs in serving a new market; improved political or public image; compliance with licensing requirements in some countries (e.g. India) which stipulate that an insurer maintains a certain portion of its portfolio in low-income areas.
for clients: preliminary evidence suggests this model allows greater insurance coverage at a lower cost benefit MFI designs and provide coverage of its own.
Disadvantages
the limited availability of potential partners in some countries;
For clients the absence of coverage of complex risks;
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EDIAIS: Application guidance note, Oct 01 formal insurers may place little importance on processing very small claims requests unless a specific process is established;
For the MFI it may be difficult to negotiate an equal partnership. Clients may come to see the MFI as endorsing the insurance product or in the worst case scenarios may not realise that the insurance product is actually provided by a different institution. This problem will be compounded if commission income for selling policies is significant and MFI staff are incentivised to sell as many policies as possible. This could introduce problems of conflicting interests when claims are made and disputes arise. The existence of insurance may reduce the demand for MFI savings and credit products.
Source: adapted from points made in Brown 2001 and by Jimmy Roth in Email discussion on devfinance listserve.
A3.6 MICROFINANCE REGULATION21 In the late 1990s regulation and supervision of NGO microfinance suddenly became a hot topic with a series of conferences, publications and committees. Governments, donors and practitioners all began talking about new legal structures in dozens of countries. The motivations for regulation of NGO microfinance were varied, and not necessarily mutually compatible: Facilitation of expansion and increasing numbers of MFIs: In some countries there was no legal structure under which is socially motivated group could legally provide loans for clients. Without such a structure loans would be legally uncollectable and microfinance providers even at risk prosecution. Even where legal structures existed it was anticipated that more focused regulation and supervision would increase the profile of microfinance and encourage expansion and new entrants.
Promotion of savings and other microfinance products: Many NGO programmes wanted to be licensed in order to access deposits from the public, or credit lines and donors or governments. As NGOs legal requirements in many countries and/or donor guidelines prohibited them from doing so. At the same time donors and governments saw a need to regulate taking of deposits from poor people in order to protect them from being exploited and losing their savings. More recently similar concerns affect insurance and pensions.
21
This Section is based mainly on the discussion in Christen and Rosenberg 2000. Other sources include Gomez, A., G. Tabares, et al. (2000); Sharif, I. and G. Wood, Eds. (2001); van Greuning, H., J. Gallardo, et al. (1998); Vogel, R. C., A. Gomez, et al. (1999). .
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Improvements in efficiency and sustainability: the ownership structure of many NGOs and the fact that Boards of directors had no financial interest in the financial health of the MFIs meant that problems often went undetected until they were too serious to be dealt with. Donors and governments expected that setting up a special regulatory window would speed up the emergence of sustainable MFIs. Some NGOs also believe that regulation would promote their business and improve their operations.
Interest rates: on the one hand MFIs and some donors were calling for removal of ceilings on interest rates. Some governments on the other hand wanted to regulate MFIs to reduce interest rates and protect more borrowers.
Tighter control on MFIs: Some governments look to regulation as a means of clamping down on and/or taxing of the some foreign-funded NGOs or other groups wanted to control more tightly.
Regulatory frameworks were introduced in many Latin American countries. In Bangladesh regulation and supervision was partly tied to funding though PKSF22. More recently in the light of experience, particularly in Latin America, there has been increasing scepticism about the usefulness of regulation and supervision: NGO regulation therefore would only apply to a minority of microfinance clients. Institutions like banks, credit unions and other licensed institutions were already regulated and supervised. Informal sector providers and moneylenders would continue to be unregulated in many countries. There are therefore questions about whether or not there should be separate regulation for MFIs, or broader regulation of particular functions which would apply to all institutions, or at least institutions above a certain scale of operation.
tight regulation and supervision has not prevented crises. Regulation and supervision has not prevented crises, fraud or in efficiency in the formal banking, insurance or pensions sector. They also did not prevent crises in MFIs who are able to circumvent legislation.23 Ownership structures continued to minimise direct financial interest and hence internal management by the Board of Directors
stringent regulation is likely to discourage innovation and entrants of new small organisations: need for diversified classification. Regulation inevitably involves a certain amount of model building and making decisions about what kind of institutions are best to microfinance and even what kind of loan methodologies or operating procedures are best.

costs of regulation and supervision may outweigh the benefits
in the absence of effective supervision for the granting of licences and appearance of regulation was likely to make organisations less risky than they
22 23
Palli Karma Shayak Foundation formed to channel funding to MFIs. This was seen in the case of Finansol/Corposol in Latin America where the dual MFI and NGOs structure was manipulated for a number of years to conceal problems leading to its final collapse.
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EDIAIS: Application guidance note, Oct 01 actually were, putting depositors savings and investments at greater risk than they were asked to make proper assessments themselves. BOX A3.8 EXAMPLES OF REGULATION: SOME PROBLEMATIC EXPERIENCES PERU: The Peruvian banking superintendency supervises more than 30 MFIs, including municipal funds, rural firms and small/medium business funds (transformed NGOs). The NGOs paid same supervision of these banks - about 0.06 percent of assets in 2000. A cost study showed that microfinance supervision was costing 30 times that amount 5 about 2% of assets. This meant that the MFIs would have to charge their borrowers an additional 3% if they were paying their full cost supervision (without including a further 1% was over the MFIs compliance costs). In Peru, MFIs could easily charge interest rates that permit them to pass these costs on fully to clients. In 2000 superintendency was yet to decide whether to raise MFI fees to cover these costs. (Christen and Rosenberg 2000) UGANDA: Efforts to develop rating and regulatory schemes for microfinance in Uganda began with an Austrian-financed project in 1996 which aimed to educate the central bank about microfinance and set up the rating system for MFIs. The rating system was unsuccessful but legislation was developed (still in draft form in 2000) for the regulation and supervision of MFIs and community-based savings and loan organisations. Other donors including the World Bank and GTZ also later provided technical assistance in this area. In the beginning the process was participatory with significant input from Ugandan NGOs. From late 1998 the process became less consultative partly due to the authorities' doubts about negotiating regulations with those who are to be regulated. At the same time there are fears that this lack of consultation may lead to some damaging decisions including: requiring all owners of the licensed intermediary to be Ugandan citizens, severely limiting foreign shareholding which would also in practice eliminate the only likely sources for equity investment in a transforming NGO. imposing licensing requirements on all community-based MFIs is number of members exceeds an extremely low limit. This could put out of business many organisations providing savings services in places where no one else is likely to provide them. There have also been disagreements about the minimum capital requirements. The NGOs wanted requirements to be low in order that a large number could require licences. The authorities on the other hand wanted requirements to be much higher in order to avoid overburdening the central bank's supervisory capacity. Experience has highlighted a number of key questions: What should be regulated? Ie which particular aspects of microfinance activity should be regulated and how can this be done without stifling innovation. Here there is a distinction between:
35
EDIAIS: Application guidance note, Oct 01 Non prudential supervision refers to requirements which do not involve the financial authority vouching for or assuming any responsibility for the soundness of the regulated institutions. E.g. registration and legal chartering of licensed entities, disclosure of ownership will control, reporting for publication financial statements, accounting and audit standards, transparent disclosure of interest rates, submission of names of borrowers and loan status to a central credit information bureau. Prudential regulation involves definition detailed standards of financial structure, accounting policies and other important dimensions of institutions business. Enforcing the standards and otherwise monitoring institutional soundness requires much more intensive reporting and on-site inspections that goes beyond the scope of normal financial statement audits. A particularly controversial area has been the issue of supervision of interest rates. Often regulation has been called for in order to exclude organisations which are subsidy dependent, with unsustainable low interest rates. But these MFIs are often capital constrained and other MFIs continue to grow. A bigger problem is government subsidised and politically directed credit programs. Who should be regulated? Should credit only MFIs be regulated? What about member owned institutions? What about ROSCAs? What about small ones? What benchmark should be used: asset size, number of members, structures of ownership and control? Who is to do the regulation? This is often a serious problem requiring a competent agency. In a commercial bank when there are problems the owners can be asked to put in more capital, this is not the case with an NGO because the ownership structure. In a commercial bank supervisor can order a halt on new lending until the problem is cleared up. MFIs can't do this because repeat lending is a contract with clients and if further lending is stopped then existing outstanding loans are unlikely to be repaid. In a commercial bank mergers or takeovers are sometimes a solution, but MFIs are not particularly attractive to outsiders. Few MFIs have reliable internal audit departments. Supervision is much more costly because of the small asset base and large number of accounts, high degree of decentralisation and more labour-intensive nature of inspection of portfolio Christen and Rosenberg point to an number of possible alternatives to without creating a new regulatory charter for MFIs: Use of existing licensing frameworks. In some countries it is possible for an NGO microfinance programme to get a bank Charter. Altering the existing regulations e.g. to remove ceilings on unsecured lending, changing requirements branches such as security standards, working hours, daily clearing of accounts or limitations on location, changes in loan documentation requirements, changes in collateral requirements and so on. self-supervision by e.g. federations of MFIs or delegated supervision by particular MFIs deposit insurance extended by governments
36
EDIAIS: Application guidance note, Oct 01 requirement that non-bank MFIs can accept deposits on the condition that all such deposits are guaranteed by a bank licensed by the supervisor
However none of these offer an ideal solution in all circumstances or for all purposes. Notably absent from current discussions of regulation have been any reference to impact, both in terms of who is to bear the costs of regulation or the types of MFI which are favoured. There has also been no discussion of ways in which the stated commitments to gender issues or environmental sustainability by donors, governments and most programmes can be mainstreamed as part of the regulatory framework. For example in relation to gender this should include at a minimum requirements for equal opportunities policies for staff and demonstration of non-discriminatory implementation.
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EDIAIS: Application guidance note, Oct 01 APPENDIX 4: REFERENCES AND FURTHER SOURCES OF INFORMATION See also the annotated bibliography of AIMS documents by Sarah Mosedale REFERENCES ACORD (1996). Background material. East Africa Credit workshop, Bakuba, Tanzania. Almeyda, G. (1996). Money Matters: Reaching Women Microentrepreneurs with Financial Services. Washington, DC, InterAmerican Development Bank/UNIFEM. Amin, S. (1993). Port Sudan and Red Sea Field Trip Report. Port Sudan, ACORD. Ardener, S. and S. Burman, Eds. (1995). Money-Go-Rounds: The Importance of Rotating Savings and Credit Associations for Women. Oxford Washington DC, Berg. Basnet, P. (1995). Trip Report to Bangladesh. Dhaka, Save the Children. Berger, M. and M. Buvinic (1989). Women's Ventures: Assistance to the Informal Sector in Latin America. Boulder CO, Kumarian Press. Binns, H. (1998). Integrating a Gender Perspective in Micro-finance in ACP Countries. Brussels, European Commission. Brown, W. (2001). Microinsurance - the risks, perils and opportunities. Small Enterprise Development 12(1): 11-24. Chen, Alter Martha 1996. ed. Beyond Credit: A Subsector Approach to Promoting Womens Enterprises. Ottawa: Aga Khan Foundation of Canada Christen, R. P., E. Rhyne, et al. (1995). Maximising the Outreach of Microenterprise Finance: An Analaysis of Successful Microfinance programmes. Washington DC, USAID. Christen, R. P. and R. Rosenberg (2000). The Rush to Regulate: Legal Frameworks for Microfinance. Washington, CGAP. Available http://www.cgap.org Michael Fiebig, Alfred Hannig, Sylvia Wisniwski; 1999 Savings in the Context of Microfinance - State of Knowledge, Eschborn, available from http://www.cgap.org
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EDIAIS: Application guidance note, Oct 01 Gomez, A., G. Tabares, et al. (2000). Regulation and Supervision of Microfinance Activities; The Bolivian Case Study. Washington DC, DAI/USAID. Available http://www.cgap.org Gulli, H. (1998). Microfinance and Poverty: Questioning the Conventional Wisdom. New York, Inter-American Development Bank. Harper, A. ( 1995). Providing women in Baltistan with access to loans potential and problems. Lahore, AKRSP Pakistan. Hulme, D. and P. Moseley, Eds. (1996). Finance Against Poverty. London, Routledge. Hulme, D. (2000). Impact Assessment Methodologies for Microfinance: Theory, Experience and Better Practice. World Development 28(1): 7988. Hulme, D. and J. Sebstad (2000). Recommendations for an Impact Assessment strategy for Enterprise Development in East Africa. London, DFID. Jansen, Anicca. Linking Microenterprise Development and the Environment: An Issues Paper and Workshop Proceedings. GEMINI Publications, USAID. 1995. Kabeer, N. ( 1998). 'Money Can't Buy Me Love'? Re-evaluating Gender, Credit and Empowerment in Rural Bangladesh. Brighton, IDS. Kabeer, N. (1999). The conditions and consequences of choice: Reflections on the measurement of women's empowerment. Geneva, UNRISD. McCord, M. (2001). Health care microinsurance - case studies from Uganda, Tanzania, India and Cambodia. Small Enterprise Development 12(1): 25-38. Imran Matin, David Hulme, et al. (1999). Financial Services for the Poor and Poorest: Deepening Understanding to Improve Provision. Manchester, IDPM Working Paper. Mayoux, L. (1998). Participatory programme learning for women's empowerment in micro-finance programmes: negotiating complexity, conflict and change. IDS Bulletin 29(4): 39-50. Mayoux, L. C. (1998). Women's Empowerment and Micro-finance Programmes: Approaches, Evidence and Ways Forward. Milton Keynes, The Open University. Mayoux, L. ( 2000). Micro-finance and the empowerment of women - A review of the key issues. Geneva, ILO.
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Mayoux, L. (2001). Learning for Empowerment Action through Participation (LEAP): Inception Report. New Delhi, PRADAN. Montgomery, R. B., D; Hulme, D ( 1996). Credit for the Poor in Bangladesh in Hulme, D. and P. Moseley, Eds. (1996). Finance Against Poverty. London, Routledge. Montgomery, R. ( 1996). Disciplining or Protecting the Poor? Avoiding the Social Costs of Peer Pressure in Micro-credit Schemes. Journal of International Development 8(2) Noponen, H. (2001). The Internal Learning System - A participatory Impact and Planning System. Small Enterprise Development(December). Rhyne, E. (2001). Mainstreaming Microfinance: How lending to the poor began, grew and came of age in Bolivia. Connecticut, Kumarian Press. Roth, J. (2001). Informal microinsurance schemes - the case of funeral insurance in South Africa. Small Enterprise Development 12(1): 39-50. Rutherford, S. (1996). A Critical Typology of Financial Services for the Poor. London, Action Aid. Rutherford, S. (1999). The Poor and Their Money. Manchester, IDPM Working paper. Pallen, Dean. Environmental Sourcebook for Micro Finance Institutions. CIDA Asia branch. 1997 available from http://www.gdrc.org/icm/environ/environ.html . Pallen, Dean. Reinventing the City: The role of small scale enterprise. CIDA Asia Branch. 2001 available from http://www.gdrc.org/icm/environ/environ.html. Sebstad, J., C. Neill, et al. (1995). Assessing the Impacts of Microenterprise Interventions: A Framework for Analysis. Washington DC, USAID: AIMS. Sebstad, J. and G. Chen (1996). Overview of Studies on the Impact of Microenterprise Credit. Washington, MSI/AIMS. SEEP Network (2000). Learning from Clients: Assessment Tools for Microfinance Practitioners: Draft Manual. Washington DC, AIMS/MSI. Sharif, I. and G. Wood, Eds. (2001). Challenges for Second generation Microfinance: Regulation, Supervision and Resource Mobilization. Dhaka, The University Press Ltd.
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EDIAIS: Application guidance note, Oct 01 Simanowitz, A. (1999). Understanding Impact: Experiences and Lessons from the Small Enterprise Foundation's Poverty-Alleviation Programme, Tshomisano. Third Virtual Meeting of the CGAP Working Group on Impact Assessment Methodologies. UNIFEM ( 1993). An End to Debt: Operational Guidelines for Credit Projects. New York, UNIFEM. UNIFEM (1995). A Question of Access: A Training Manual on Planning Credit Projects That Take Women Into Account. New York, UNIFEM. van Greuning, H., J. Gallardo, et al. (1998). A Framework for Regulating Microfinance Institutions. Washington DC, World Bank. Available http://www.cgap.org Vogel, R. C., A. Gomez, et al. (1999). Regulation and Supervision of Microfinance: A Conceptual Framework. Washington DC, USAID. Available http://www.cgap.org White, S. ( 1995). Bangladesh. In Riddell, R. C. and M. Robinson, Eds. ( 1995). Non-governmental organisations and rural poverty alleviation. Oxford, ODI/Clarendon Press. Sylvia Wisniwski, 1999 Microsavings Compared to Other Sources of Funds Eschborn, available from http://www.cgap.org WWB and ICWC (2000). Strategies for the provision of Insurance for Low Income Women Entrepreneurs. Sri Lanka, Women's World Banking and International Coalition on Women and Credit. World Bank (1996). Implementing the World Bank's Gender Policies: Progress Report No 1. Washington, World Bank. Graham Wright 1999a The Case for Voluntary, Open Access Savings Facilities and Why Bangladesh's Largest MFIs Were Slow to React, Eschborn, available from http://www.cgap.org Graham Wright, 1999b Beyond Basic Credit and Savings: Developing New Financial Service Products for the Poor, Eschbornoor available from http://www.cgap.org Wright, G. 2000 "The Relative Risks to Poor People's Savings" available from the new MicroSave-Africa website: www.MicroSave-Africa.com
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EDIAIS: Application guidance note, Oct 01 Useful websites for location of documents Consultative Group to Assist the Poorest (CGAP): website contains link to Microfinance Gateway, World Bank, USAID and other donor sites as well as copies of working papers, AIMS documents and other documents http://www.cgap.org Worldwide directory of Microfinance institutions and related organizations at http://www.planetfinance.org/en/library/Repatlas/atlas.jsp. Microcredit virtual library www.gdrc.org Womens World Banking www.swwb.org has a good search engine for innovations by member organizations. Examples of insurance, pensions and general points on gender ILO Social Finance Unit www.ilo.org/sfu; USAID Micro-enterprise Innovation Project www.mip.org; MicroSave-Africa http://www.MicroSave-Africa.com/ ImpAct www.imp-act.org .
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Micro Finance Appendices

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EDIAIS: Application guidance note, Oct 01

APPENDIX 1: MICRO-FINANCE PROJECTS FUNDED BY DFID1

EDIAIS: Application guidance note, Oct 01

Financial Services for the Poor Barclays Loan Guarantee Scheme

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Buy business equipment Rescue mortgaged property

Repay old debt Maternity Death Widowhood

Working capital for business

SEWA Bank Loans

Improve / Repair house

Savings at SEWA Bank

Losses in Floods / Riots Festivals Pilgrimage Old Age

Buy new house Marriage of Children Education of Children

Source: SEWA Bank Reports

EDIAIS: Application guidance note, Oct 01

SAVINGS AND CREDIT

?DIVERSION OF LOAN ?WOMEN MAY GIVE TO MEN

?MEN MAY WITHDRAW THEIR INCOME CONTRIBUTION

SOCIAL AND POLITICAL EMPOWERMENT

?INCOMES MAY BE LOW

?MAY REINFORCE EXISTING ROLES

IMPROVED WELLBEING OF WOMEN

?MEN MAY CONTROL INCOME INCREASED STATUS AND CHANGING ROLES

WOMEN'S NETWORKS AND MOBILITY

?WOMEN MAY NOT WORK FOR WIDER CHANGE

IMPROVED WELLBEING OF MEN

INCREASED WAGE EMPLOYMENT FOR WOMEN

WIDER MOVEMENTS FOR SOCIAL AND POLITICAL CHANGE

EDIAIS: Application guidance note, Oct 01

BOX A2.1: WOMENS EMPOWERMENT AND MICRO-FINANCE: SOME PROBLEMATIC CASES

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These informal and private sector arrangements vary in:

EDIAIS: Application guidance note, Oct 01

specialised registered professional microfinance providers or development banks

village banks registered cooperatives and credit unions

EDIAIS: Application guidance note, Oct 01

development NGOs and micro-finance intermediary facilitators

See for example CODEC in Bangladesh.

Organisational mandates reduction and gender policy.

EDIAIS: Application guidance note, Oct 01

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EDIAIS: Application guidance note, Oct 01

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the limited availability of potential partners in some countries;

For clients the absence of coverage of complex risks;

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costs of regulation and supervision may outweigh the benefits

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