Integration of Microfinance and Other Services

Find out how the integration of non-financial services, such as education, with microfinance can be accomplished.

Integrating Microfinance with Education

The integration of non-financial services, such as health education and lifeskills training, with microfinance is a powerful tool in the fight against chronic hunger. Three ways of accomplishing this integration include:

Credit with Education
The third option is to fully integrate financial and non-financial service delivery. The same staff of the same organization provides multiple services to the same clientele. In the case of health, credit officers would also provide health education services to their village bank clients.

This Credit with Education model reduces costs of delivering two or more different services, since it only requires one set of staff members to provide two different services. Also, most or all of the costs can be covered by revenues from credit operations, since the staff are already in the field to provide support for village banks (in effect, credit operations are cross-subsidizing the additional service(s)). However, in fully-integrated programs, field staff must learn to wear multiple hats and perform services that, at times, require different sets of skills. Also, the scope of the services is mostly limited to education and facilitation activities that can occur during a weekly village bank meeting. In the health services example, it is possible for loan officers to deliver a health education curriculum, but they probably would not be able to provide health care.

Credit with Education is the best-known example of the credit-and-education model of integration. It combines microfinance services and health, nutrition, and business education into a single service for women in poor, rural areas of the developing world. This type of integration of group-based poverty lending and nonformal adult education has been reaching marginalized families and communities around the world for more than a decade.

Linked
Services can be provided by two independent organizations, if good-quality financial and non-financial service providers are operating in the same service area (actually or potentially) and are willing and able to serve the same clients. In this linked services model, the financial service provider does not directly provide non-financial services; it partners with a non-financial service provider.

In the provision of health services, for example, a financial services organization may form a strategic alliance with a local health clinic and allow health care professionals to participate in the regular group meetings to attend to the health needs of group members and their families.

This linked services model is particularly appropriate when the expertise or infrastructure required to deliver the non-financial service is quite different from that needed for financial services. A potential disadvantage of linkage is that the microfinance institution (MFI) does not have control over the quality of the partner's services. Tension also may arise as each organization competes for the time and attention of the clients.

Parallel
A more integrated approach is the delivery of parallel services by two programs of the same organization. An organization committed to providing multiple services could create two distinct programs with separate, specialized personnel who share the same organizational name and, perhaps, the same physical and administrative infrastructure. Using the example of health services again, an organization might elect to run parallel programs employing specialized health educators and care providers to offer health services to their clients while employing separate banking staff for financial services.

This parallel services model has a clear division of staff functions, yet quality control is in the hands of the single overarching organization. This model places a larger financial and management burden on the organization than either the linked services model or the Credit with Education service model. There is also some risk of duplicating services that may already be present in the area.

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