Are you poor enough?
You may say, “What?”
Yes, this is a valid question for all those who work with microfinancing. The target clienteles are poor.
But, how are we going to say that our clients are poor?
The current trend is to make means testing simple for field officers to identify the level of the prospective client. Usually, information is gathered under three indicators to rank the client against a scale set by microfinance institute.
Here are 3 Ways of Means Testing for Client in Microfinance:
The quality of materials, size and strength of the house are examined and recorded. These are consolidated to compute a final ranking. Those prospective clients within the cut off are permitted to join the microfinance program. Those outside the scale are excluded for entry.
The current value of assets is calculated (taking into account the depreciation value of particular asset) and the total value is compared on a scale against a selected or predetermined maximum amount. However, there are debates as to which assets should be included in the computation. Some microfinance institutes prefer to record only those productive assets—assets that are directly used in the project– while others include all assets like TV, radio, etc to indicate accurately the level of poverty of any prospective client. To this, microfinance institutes must have clear guidelines.
The per capita income of the prospective client’s family is recorded not as a measure of their ability to repay but as indicator of their level of poverty. Field officers are well trained to seek out all forms of income as well as the family expenses.
Usually, those clients placed above the cut off in any of these 3 ways of means testing are excluded in the microfinance program. However, there are cases where exceptions exist and microfinance institutes must have systems to allow any excluded prospective clients to state their cases. All exceptions must be within the guidelines of any particular microfinance institutions.
For additional indicators, you may use the poverty index of your country.
These are the common indicators of means testing in microfinance. It does not mean that you have to stick with them. However, it is wise to start with them or include them in your client selection processes.
In your own experience, do you think your clients are poor enough to be within your target segments? Or, there are some clients included in your microfinance programs that are above or below the scale?
Share your experiences with us. By sharing them, you can help others in changing and saving lives.
If you are just starting or about to start, better stick with these 3 ways of means testing for client and improve them as you gained some experiences.
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