Category Archives: Resources, Tips and How Tos

4 Proven Approaches of Microfinance

The group approach is not the only way to advance the microfinance system. Failure on the part of MFIs to recognize this fact results to high defaults and high client turnovers. Please be aware.

The group approach is the simplest approach, though, in terms of processes, systems and management. But, knowledge of other approaches widens the horizon for other better choices and facilitates easier ways to adjust to changes within the microfinance sector.

4 Proven Approaches of Microfinance

  1. Co-0perative Approach
  2. Financial Association Approach
  3. Individual Approach
  4. Village Bank Approach

The cooperative system is considered as one of the oldest systems of microlending. Cooperative as organization is user-owned enterprise providing both savings and credit services to its owners-members. It is also effective in outreach. Cooperatives are slowly catching up to the standard of world-class financial institutions in terms of management and services. So, they are becoming good players in microfinancing.

Financial Associations Approach are village-based systems. These are usually owned and managed by communities, as in the case of cooperatives, that generate their own capital. FAs are more on savings services than credit services. Member gives money in scheduled basis and receives that amount in rotation-basis. The problem with this approach is that of governance and management but it is also good in outreach.

Update: (I was flagged down below (laughs) and I have to clear this out.)

Financial Associations Approach, here, may includes ROSCAs and ASCAs as well as those pre-credit union associations and/or non-government associations that eventually developed into formal lending institutions.

Another note:

Do not look at these approaches on how they are formed or their purposes but focus on the methods on how they use their capital. Pick up the bests among various methods and start your micro-finance program.

Village Banking Approach is popular in microfinance sector because of Grameen and is similar in a lot of ways to the group lending system. It is more focused to rural areas. This system, like the Financial Associations, is based on the concept of traditional rotating savings and credit associations. Contact with the members happens at a longer interval than in a normal group lending practice.

Individual Approach is almost similar with the traditional formal banking approach in credit delivery. It is slow in outreach and is more effective when a microfinance institute is dealing with individuals who owned medium enterprises.

There are other approaches or innovations to these approaches but, it is better to start with these 4 proven methodologies if you are still starting up. You can mixed them all in your operations, though, if you are already capable of pulling them under the rugs.

However, group lending method is still the simplest in microfinance.

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Analysis Paralysis is Beneficial to Microfinance

Haven’t you experienced being numbed and you tried kicking your legs under your table but can’t do it?

You are thinking to do something but your body does not do any movement. Your body is not obeying your brain.

How about this? You are always doing something you thought were good but you are always achieving below the performance standard.

The first two are called ‘paralysis’.

The last one is called ‘mediocrity’.

Paralysis and Analysis

Analysis is almost like paralysis. These two words and ‘worlds’ are not only similar with the ‘lysis’ but they are similar in terms of movement or not having movement at all, the ‘stillness’. They could be merged into one ‘world’.

You analyze your business all the time. You always wanted to have good numbers of outreach, good loan portfolio quality, and manageable portfolio at risks. You wanted to implement some good techniques to enhance your operations and become cost-effective. You liked to know the causes and the impacts of the data at hand.

That’s analysis. You are thinking about something happening.

But, you are not making a movement and it is not happening at all.

It is, by now, safe to say that this is ‘analysis paralysis.’

The term “analysis paralysis” or “paralysis of analysis” refers to over-analyzing (or over-thinking) a situation, so that a decision or action is never taken, in effect paralyzing the outcome (

Analysis Paralysis is a fatal problem of some leaders and managers. This is often demonstrated by their activities of almost engulfing all data, statistics, reports and studies; a process wherein more researches are required sans real decision. This is a mere activity without achievement. A no movement activity, how’s that?

Oops! A fatal problem? Not really, if you are aware of it.

It could be fatal if you find yourself engulfed and analyzing data for weeks and months without moving or doing something, and without even knowing it. That’s problematic and fatal!

When Analysis Paralysis is Beneficial to Microfinance?

Everyday, your body tells you when to rest. And every night, you’ll find yourself asleep for some hours or just a couple of hours, at least, and your body’s only movement is the ‘rapid eye movement.

Nature says: you need this paralysis everyday. Result: you are energized.

In work, they say: work, work and work can make a good man dull. You need to play (?).  Result: you are more productive.

Stephen Covey says: sharpen your saw! Result: enhanced performance.

We have so much going on in our businesses. It takes out our energies. But, it really help if we could take a moment doing nothing and enjoy the stillness, the no movement of our muscles and let our brains to the jobs for some time, just thinking about the problem. No movement, just be there. Be paralyzed. Just there thinking what you’ll do when you are ready to move.

Analysis refreshes our brains and bodies and, enhances performance.

In microfinance, the rigors of the business can take your energies and your abilities to find time to sharpen your saw, to having a good tennis game, to having your happy time with your personnel or co-employees or with your family.

Stop. Be still. Be paralyzed.


Let all your staffs or co-employees or your partners do this. It helps.

Analysis Paralysis Can be Fatal

It can be fatal, of course, as I mentioned above.

Imagine that one night, you relaxed and fell asleep and your only movement was the REM and for days, you’ve been in that state. Maybe, you will never realize that you are paralyzed. Friends were pretty much concerned about you and logistically, you are losing everything.

In business, analysis paralysis is beneficial when you do it at constant period or regularly. It can be fatal when you put all your waking time analyzing without even coming out with a real, on time decision.

With paralysis, you need to seek medical advices. In analysis paralysis, you need to seek out your mentors or some experts for advices.

Some possible questions would be:

  1. What are the techniques that can create added value for your customers/members/clients?
  2. How to create services/products that can help your customers move faster towards their goals?
  3. How to make your feet moving again towards your goal?
  4. How to make your weaknesses become your strengths.

Every questions should be accompanied with action sheets because every answer needs action, movement towards a certain objective.

And mediocrity, no more.

And gone are the days that mere activity is already an achievement.

So long…


photo credit: Professor Muhammad Yunus: Building Social Business Summit via photopin (license)