Inafi Alternative Position On Microfinance

The Alternative Dimension of INAFI

INAFI network members have sought to find an alternative, to attain the advantages of a sustainable financial operation and achieving financial sustainability over time, without sacrificing the developmental objective of the organisation vis-a -vis poverty focus. INAFI’s social mission is associated with deepening outreach, gender mainstreaming, empowerment, enhancing human rights, health and education. INAFI promotes both sustainability of the NGOs/MFI as well as of the clients.

INAFI believes that social impact, especially regarding health, education, and empowerment, are important goals of microfinance in their own right. Through The Social Impact Measurement (SIM) tool INAFI now has a monitoring tool at hand to advocate better for this. The tool can enhance and motivate NGOs/MFIs to monitor its outreach regularly and impact of the programme on the lives of families of Microfinance borrowers.

Contrary to commercialisation of Microfinance INAFI promotes ‘alternative’ paradigm that microfinance is meant for poverty alleviation, empowerment and enhancing social development.

The INAFI network is comprised of numerous and varied microfinance organisations across the globe. In order to push the sector forward, it is helpful to strengthen and unify the network, and advance a cohesive voice equally from all the regions. In doing so, INAFI must re-establish its identity and delineate its common network values. A first step in this process is to re-discover what is meant by ‘alternative.’ INAFI’s alternative is to recognize that although microfinance has limitations, it can be used in creative and responsive ways to make a real difference in the lives of the poor – economically, socially, and culturally. A key feature of INAFI’s alternative approach is its focus on social and human development at the same time as financial and economic development. Members offer a diverse array of products and delivery methodologies while striving to tailor them to meet the varying needs of the poor.

INAFI’s alternative is a movement that challenges traditional development thinking and the structural constraints that traditional approaches face to arrive at a more flexible, demand-driven, and enabling manifestation of microfinance service provision. Ownership, participation, and a range of services – financial and non-financial – are all essential components of the alternative. INAFI’s firm adherence to this philosophical stand as follows:

Social Development
INAFI recognizes Social Development as a central objective. As such, INAFI should advance this agenda through microfinance initiatives with fused action and allocation of resources.

Affordability, appropriateness and accessibility
At the lower levels of the pyramid these Triple A’s of service delivery are crucial to make microfinance work. Affordability is not compatible with current service rates charged in lager parts of the microfinance sector. As a rule of thumb in these lower brackets clients should not be forced to pay more than 20% over loans in real money for exercising their right to be served.

System inefficiencies, affluent MFI live styles, poor portfolio quality, high costs of capital and other factors driving up interest rates should be no concern of clients as it infringes on their rights.

Clients are not supposed to work for the system; the system is to work for them. If the system cannot do that, it needs to be changed or replaced instead of the clients being deprived of their rights. In other parts of the microfinance sector the system has proven to be able to work this way, albeit under different terms and conditions than those promoted under the commercialization drive. A public sector responsibility therefore is to ensure that it will work elsewhere as well and that is what resource allocation should be made instrumental to.

Ownership and Participation
A key feature of INAFI’s alternative approach is its focus on ownership and participation so as to better reach a harmonized social and human development at the same time a financial and economic development The entire INAFI brotherhood believes Microfinance as most powerful instrument for poverty alleviation if it is associated with social development initiatives through active participation and sense of ownership. Unlike other international microfinance networks, INAFI is truly a practitioner’s organization that has been developed through building up block by block beginning from the country level(national) then, extend to the continental level(regional) , and further to international level. The three regional INAFIs (Africa, Asia and Latin America) merged together to establish Stichting INAFI International, registered in The Hague. The network gradually evolved from a loosely organized get-together of concerned practitioners into a strong coalition of like-minded practitioners, thereby making INAFI a network of networks. The MoUs signed in 2007 are a concrete sign of the participatory philosophy of INAFI.

Business Development Services
INAFI upholds the importance of improving the viability of microfinance programme participants by providing appropriate financial products and context specific business development services.

Policy Framework and advocacy
INAFI has embraced interventions for social security, conduct action-based research for product and methodological innovation and product diversification, and disseminated such findings to promote sustainable poverty alleviation.

INAFI advocates policies that will create an enabling environment for microfinance and establishes strong linkages with government, public and private sector financial institutions, donor agencies, and other stakeholders who play an essential role in development, with the aim of achieving quality outreach and promoting sustainable access to resources for the poor and the institutions that serve them.