By Chapal Mehra
Microfinance is arguably one of the most powerful tools of poverty reduction in the world today. It helps the poor by providing them essential financial services that they otherwise cannot access.
However, many contend that the role of microfinance institutions (MFIs) should not be to offer financial services alone. Grameen Bank in Bangladesh, which is credited with the world’s microfinance revolution, was amongst the earliest MFI’s to provide its clients health services along with micro loans. The rationale for this was a simple—the poor would remain poor unless they have good health. The organization created two distinct programs: one delivering microfinance services and the other delivering social services. Each program has a specialized staff with different responsibilities but the same goal—ending poverty.
For Pro Mujer, a Latin America MFI, it began with the realization that illness was the most common reason for women to default on their loans. They then created a program that integrated health care and financial services. Housed in Pro Mujer’s neighborhood offices, these health centers provide basic health education before and after repayment meetings. The medical staff discusses relevant health topics such as nutrition, hygiene, pre-and post-natal care, and reproductive health. Thus, clients can conveniently access health care and business support in a single location. To provide health care support, Pro Mujer operates clinics or partners with other health care providers.
Johana Vallecillo, a potter and single mother of two is a beneficiary of this program. She had her first Pap test in 3 years at a Pro Mujer health clinic. The test detected the early stages of cervical cancer. A referral to a nearby hospital ensured treatment that eventually made the cancer disappear. Today, she is back at work and is one of the strongest advocates of preventive health care in her community.
Johana’s case highlights the services MFI’s can provide to poor communities—over and above providing them access to financial services. While Pro Mujer’s loans helped Johana expand her business, it was their health services that saved her life. (It is increasingly argued that the role of microfinance in providing benefits such as health services remains unexplored.)
Freedom from Hunger, an America-based international non-profit, launched its Microfinance and Health Protection (MAHP) initiative in 2006 to create key health protection services. This was intended to safeguard family health, and it protect clients from catastrophic health expenses. Supported by the Gates Foundation, MAHP builds on the premise that it is essential to combine credit services with education on health and other issues critical to poor communities. Women who participate in this program engage in classes on topics from child health to money management. They may also have access to regular check-ups to prevent health problems. If treatment is needed, they have access to health loans, health savings, or linkages to health micro-insurance to help pay for services.
Grassroots evidence reveals that offering these health protection options secures both the health and household incomes of poor families. While paradigms may differ, health-related services enhance the ability to repay loans on time and increases loyalty to the MFI. This, in turn, ensures sustainability, growth, and added revenues.
The success of these programs has been valuable in emphasizing the critical role health plays in microfinance and poverty reduction. Critics point to increased costs and stress that such initiatives pose a risk to the sustainability of the MFI. Further, they argue that MFI’s lack the expertise to provide and sustain health initiatives and should stick to their core mission—to provide basic financial services.
In Grameen Bank’s case, although the quality of programs is maintained by the organization, the cost centers are separated. Such an arrangement offers the benefit of minimal financial risks to the MFI. At Freedom from Hunger, this program has actually increased revenue from health loans. If the single largest reason for inability to repay loans is health expenses, ensuring the health of customers is the natural way to building loyalty and sustainable growth.
The provision of financial services alone is insufficient for poverty alleviation. Helping people climb out of the infamous “poverty trap” is not just about credit but also about security. For this approach to gain ground, more reliable studies and evidence are required. It is necessary to study these experiments carefully to evolve models that can work in diverse microfinance contexts. It is also necessary that more MFI’s experiment with these ideas.
Undoubtedly, health is the poor’s most valuable asset. Microfinance offers a powerful platform to provide health benefits to the poor. MFI’s now must realise that the growth of their business and that of their customers is not possible by credit provision alone. The answer may lie in ensuring customer health so that they can put the credit to good use.
