By William O. Maddocks; Commissioned by the Global Microcredit Summit; 2011; 31 pages; available at: http://www.globalmicrocreditsummit2011.org/userfiles/file/Workshop%20Papers/W_%20Maddocks%20-%20How%20Can%20Microfinance%20Programs%20Help%20the%20Struggle%20Against%20Social%20Problems%20Such.pdf
This paper presents an analysis of the role of microfinance institutions in helping to solve “seemingly intractable social problems” including begging, domestic violence, HIV/AIDS and discrimination against the disabled, all while maintaining financial sustainability. Mr. Maddocks presents examples in which this has been accomplished through a blend of financial services and social programming using “group-based methodologies.” The paper focuses on how group-based microfinance programs are able to “build pathways to healthier, more fulfilling and productive lives for their members,” studying how collaboration between men and women through microfinance initiatives can lead to “concrete progress in challenging some of the core issues of poverty such as health, education, isolation, and gender violence.” The paper also explores whether the “personal and associational bonds created through group interaction” are the “real engine” driving social and economic development, rather than being the result of access to credit and financial services.
The programs studied were the Intervention with Microfinance for HIV/AIDS and Gender Equality (IMAGE) of South Africa’s Small Enterprise Foundation, the National Union of Disabled Persons of Uganda’s (NUDIPU’s) We Can Change program, Grameen Bank’s Struggling Member’s program (also known as the Beggars program) of Bangladesh and the Targeting the Ultra Poor program and Graduation Model Pilot Project of BRAC (which was formerly known as Bangladesh Rural Advancement Committee).
According to the paper, the SEF IMAGE program has proven successful at building social capital among poor women in South Africa, challenging gender violence and breaking down social taboos against potentially life-saving discussions about sex, sexually transmitted diseases, and sexual violence. The paper attributes the program’s success to its linkage to a “strong and well established” microfinance institution that possesses an understanding of the population it serves and holds program sustainability at the “forefront of its organizational objectives.”
NUDIPU’s We Can Change program sponsors informal village savings and lending associations, helping disabled persons in Uganda save and borrow in groups, which has led to the creation of livelihoods, direct participation in community organizations, and a “pathway to entrepreneurship” for a segment of the Ugandan population that has historically been excluded from access to such resources. According to the report, the effectiveness of the program has been largely due to the established reputation of NUDIPU, which has helped to mitigate social stigma surrounding the disabled and their potential roles in entrepreneurial ventures.
According to Mr. Maddocks, Grameen Bank’s Struggling Members program has proven effective in providing financial resources to beggars, challenging the social isolation of the group by granting them “Struggling Members” status, which includes flexible access to credit and other services to which more financially well-off Grameen Bank members are entitled. This program has especially helped female beggars “grow their self-confidence and basic skills needed to become petty traders,” helping them to build better, more financially stable lives and shed the social stigma begging.
The paper attributes the success of BRAC’s Targeting the Ultra Poor program to letting go of “rigid methodological models” and instead embracing that “replication does not mean duplication.” This approach has, according to the author, enabled BRAC to offer people “a graduated approach to moving out of destitution by steadily building assets and connection to the social networks that other poor and more affluent people benefited from.”
Finally, the paper identifies specific elements of effective program design, suggesting that the pairing of “transformative social programming” with effective and appropriate financial services is critical to the ability of microfinance providers to effect social change. According to Mr. Maddocks, this dualistic approach enables microfinance providers to “marshal the aspirations of their poorest members into a well sequenced and rational series of small wins through learning, earning and accumulation of assets,” helping to eliminate “extreme poverty and its associated maladies of disease, disability, illiteracy and disenfranchisement,” which “literally disintegrate the social bonds that create civility, build and maintain the social capital needed to cope with adversity and imagine collective solutions.”
Mr. Maddocks’ paper concludes with a call for microfinance institutions to pioneer new ways to use microfinance services to promote social change, explaining that “solving difficult and often deadly social problems requires holistic approaches for both the clients who need to be served and the organizations that take on the role of assisting them. This role may be well beyond the comfort zone of many mainstream, market-oriented MFIs. But if a new microfinance model is emerging, it will take pioneers, such as those highlighted in this paper, who are willing to look deeply into the causes of poverty and social exclusion and are committed to waging a multilateral assault on the conditions that make this poverty possible.”
Mr. Maddocks is the Sustainable Microenterprise Development Program (SMDP) Coordinator at the Carsey Institute of the US-based University of New Hampshire.
By Makai McClintock, Research Associate
About Grameen Bank
Grameen Bank is a Bangladeshi microfinance institution that provides loans to poor entrepreneurs in rural areas. It was founded in 1976 by Muhammad Yunus, who, along with Grameen Bank, won the 2006 Nobel Peace Prize for his work in developing the concept of microfinance. As of December 31, 2011, Grameen Bank reported to the US-based nonprofit Microfinance Information Exchange total assets of USD 1.63 billion, return on assets (ROA) of 0.41 percent and return on equity (ROE) of 6.82 percent. For the year 2012, Grameen Bank reported a gross loan portfolio of USD 1 billion and total deposits of 1.65 billion.
About Bangladesh Rural Advancement Committee (BRAC)
Established in 1972 as the Bangladesh Rehabilitation Assistance Committee, BRAC is an NGO based in Bangladesh. According to its website, “BRAC works with people whose lives are dominated by extreme poverty, illiteracy, disease and handicaps. With multifaceted development interventions, BRAC strives to bring about change in the quality of life of poor people in Bangladesh.” As of 2011, BRAC reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 670 million, a gross loan portfolio of USD 640 million, approximately 5 million borrowers, return on assets (ROA) of 2.78 percent, return on equity (ROE) of 9.30 percent.
About Consultative Group to Assist the Poor (CGAP)
CGAP (Consultative Group to Assist the Poor) is a US-based nonprofit policy and research center dedicated to increasing financial access for poor people worldwide. CGAP is supported by approximately 40 development agencies and private foundations. Its mission is to provide market intelligence, promote standards and offer advisory services to governments, microfinance providers, donors and investors. For the fiscal year ending June 2012, CGAP had a budget of USD 22.5 million. CGAP is co-located with the offices of the World Bank Group in Washington, DC.
About Sustainable Microenterprise Development Program (SMDP)
The Sustainable Microenterprise and Development Program (SMDP), housed in the Carsey Institute in the University of New Hampshire, provides training and networking opportunities for practitioners in the fields of microfinance, enterprise development, social enterprise, community based and rural development. The SMDP offers a professional development training experience with a concentration on program planning, implementation and impact evaluation. Course topics cover a wide range of best practices from financial, risk and human resource management, social performance monitoring and evaluation, value chain and ProPoor market development, social enterprise, microfinance investment readiness, inclusive youth financial services and sustainable responses to climate change.
Sources and Additional Resources
“How Can Microfinance Programs Help the Struggle Against Social problems Such as Begging, Child Labor, Prostitution, Violence Against Women, Criminality, Gangs, and Drug Addiction?;” by William O. Maddocks; Commissioned workshop paper at 2011 Global Microcredit Summit; 2011; http://www.globalmicrocreditsummit2011.org/userfiles/file/Workshop%20Papers/W_%20Maddocks%20-%20How%20Can%20Microfinance%20Programs%20Help%20the%20Struggle%20Against%20Social%20Problems%20Such.pdf
MicroCapital.org story: “MICROCAPITAL PAPER WRAP-UP: Women are Useful to Microfinance: How Can We Make Microfinance Be More Useful to Women”; published April 11th, 2012; http://www.microcapital.org/microfinance-paper-wrap-up-women-are-useful-to-microfinance-how-can-we-make-microfinance-be-more-useful-to-women-workshop-paper-at-2011-global-microcredit-summit/
MicroCapital.org story: “MICROCAPITAL PAPER WRAP-UP: The Debate on outreach and Impact: What Do We Know and How Do We Know It”; published February 23rd, 2012; http://www.microcapital.org/microfinance-paper-wrap-up-the-debate-on-outreach-impact-what-do-we-know-and-how-do-we-know-it-by-david-s-gibbons-published-by-global-microcredit-summit/
MicroCapital Universe Profile: Grameen Bank
MicroCapital Universe Profile: Bangladesh Rural Advancement Committee (BRAC)
MicroCapital Universe Profile: Consultative Group to Assist the Poor
MicroCapital Universe Profile: Sustainable Microenterprise Development Program (SMDP)
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