ABSTRACT
Microfinance institutions (MFIs) have different goals than banks. The products and services offered by MFIs are different from what banks offer. Microfinance products are also different in the way they are delivered. This chapter discusses the main methods and techniques of doing microfinance practically: selecting clients on the basis of their poverty status, organising clients into groups, securing loans with instruments that have little or no market value and combining financial and non-financial services. Each technique reflects an effort to reconcile the needs of poor clients with the institutional interest to ensure profitability. Targeting is the selection of a beneficiary group to ensure its eligibility. Usually associated with welfare programmes, incomes policies or the distribution of subsidies, grants and allocations targeting is also a characteristic practice in microfinance. Targeting techniques range from identifying and actively going towards the client to a more indirect and hands-off approach, which leaves it to the discretion of the client to make the first step.
