When traditional banks are unwilling or unable to operate, deep-rooted poverty, aid-dependency or local loan sharks often move in to fill the gap. Microfinance can prevent this from happening, by offering a more positive long-term solution.
MFIs include organizations making loans to micro-entrepreneurs, farmers and households. There are also financial institutions lending to small to medium enterprises (SME's) and wholesale lenders supporting smaller organizations such as credit unions. Then there are multi-purpose institutions that combine microfinance with community services in health or education.
Many MFI's need support in risk managment. Our risk management capacity building explores key risks, enabling partners to draw up risk scorecards and identify steps to mitigate risk. We have provided this from of support in Africa, Eastern Europe, Mexico, Central America, the Caribbean and Southeast Asia.
We encourage and support partners' adoption of relevant approaches to improve their financial services and practices. The Progress out of Poverty Index (PPI) assists with client targeting. Adherence to the Client Protection Principles (CPPs) enhances and ensures client protection. Our SPM mentoring programme provides guidance to MFI's on how to improve strategies and operations for the benefit of low income clients. We also build partners' capacity in planning and positioning, for example with a strategic reorientation, and help MFI partners develop products and services better suited to their clients' needs.
Oikocredit's mentoring programme for financial services supports MFIs in delivering client benefits such as better incomes, reduced risk, woman empowerment, enhanced access to services and improved managment of repayment difficulties. Mentors help partners clarify goals, identify strengths and opportunities, build organizational commitment, and draw up and implement action plans.