Growth of FI – Alternative Strategies

Reach more clients in the same area or expand in new areas,

Provide the same services to new clients or new services to existing clients,

Provide services to clients of competing MFI or to those presently un-served.

Intensive Approach – more products to the same clients Regular saving and successful recovery of

small loans qualifies clients for a larger loan; the institution should use its close knowledge of its clients’ performance to assist them further.

Most people do not want to be self-employed entrepreneurs; they want to be employed, and larger loans to a few entrepreneurs will enable them to employ the remainder.

The promise of larger loans will encourage good members to join the programme.

Intensive Approach – more products to the same clients The transaction costs of a large loan are

much smaller, as a percentage of the amount lent; it is more profitable to lend larger sums.

Better-off clients will borrow more and will also be able to save more; larger loans will lead to more savings mobilisation.

Growing clients are successful clients; if it refuses to finance them, the MFI will end up only with the worse clients.

Extensive Approach – more clients with the same products An MFI’s task is to alleviate poverty; it should

aim to reach as many poor people as it can, If the MFI starts to serve those who are

better-off, its client profile will drift upwards and its services will inevitably be ‘captured’ by the rich, who will, as always, exploit the poor.

Successful organisations, of any type, should ‘stick to the knitting’; they should do one thing well, and not try to serve different types of clients with different products.

Extensive Approach – more clients with the same products Individual lending is very different from

group lending, and requires different skills and different systems.

Many small loans are less risky than a smaller number of bigger ones.

Large borrowers are unwilling to work in groups and to offer or need the security that a group offers; their presence will disturb the culture of a group-oriented MFI.