Rethinking Microfinance

Last Thursday, I learned about a microfinance organization that helps the poor save while borrowing, access interest-free loans, and make a profit! Sound impossible? Guess what? It’s happening right here in Bangladesh. And, SafeSave, the microfinance organization implementing this promising model, offers an individual service with no groups, no meetings and no joint liability, featuring daily doorstep collection and very flexible variable repayment terms. And it lends directly to women and men!

All this fantastic information came to the attention of the Social Innovation Lab at a workshop organized by BRAC Microfinance. The workshop was conducted by Stuart Rutherford, a longtime microfinance practitioner/researcher, author of ‘The Poor and Their Money’ and founder of SafeSave. The purpose behind it, as Shameran bhai, BRAC Microfinance Program, put it was “…to introduce our staff to innovative models that our peers are working with, entirely new perspectives on microfinance and hopefully empower them to make our [MF] model more flexible and modern.”

A few of the ways in which SafeSave is particularly innovative are: it invests heavily in technology, uses GIS mapping to get a detailed idea of the operation area, trains its staff to use smartphones to record key stats, records all data digitally making them accessible from anywhere in the world. “I can check on precisely how my loan officers in Kalyanpur are performing from my apartment in Tokyo,” Mr. Rutherford claimed proudly.

In a predominantly Muslim country like Bangladesh, and in a world that has grown a bit skeptical of microcredit, the fact that SafeSave’s loans are interest free has enormous appeal. But that doesn’t mean that SafeSave doesn’t make any money out of the deal; they charge “fees for disbursement.” So, this organization appears to have figured out how to have its cake, and eat it too! Food for thought for our super-talented staff?

This workshop is a great example of how we can learn from other institutions. But why stop there? Why don’t we all chip in with our thoughts and ideas and help transform BRAC’s microfinance model into the most EFFECTIVE, INCLUSIVE and INNOVATIVE model in the world!

2 thoughts on “Rethinking Microfinance

  1. seems to be very innovative,interesting and a very provocative concept as well. looking forward to know more about this concept. and thanks Ishtiaque for providing this article.
    it gives me the impression that an innovation has started its journey already.

    1. , I’m not sure the microfinance soitcen of your critique is that on point in that I don’t think Philanthropedia is trying to answer the question of whether a sector as a whole is having an impact, whether that sector is microfinance , climate change , or the other sectors they cover. Instead, they’re answering a narrower question: I want to give in a certain area: which non-profits in that sector are doing the best work .And while I think it’s vitally important that someone, whether it is GiveWell or others, explore the macro question of whether the sector as a whole is having an impact, I don’t think it’s illegitimate for Philanthropedia not to address that issue. In fact, given their model, I think they are right to leave it alone and focus just on identifying the tops orgs in different fields. It’s what their model is good for.

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