My name is Kayla Villnow, and I work for Esperanza International down in the Dominican Republic.  I have left a couple of posts, but not nearly as many as I could!  Being that one of my New Year’s resolutions is to contribute more frequently, I thought I’d start off with a question for the Mykro community… what do you think is better, a simple micro credit model, or a micro credit-plus model?

Just in case there are some of you out there who don’t exactly know the difference, I’ll start by explaining the primary differences.  First off, a micro credit institution (more commonly referred to as MFI’s) will administer micro loans to borrowers in both a group-lending model, as well as an individual borrower model.  The loan officer works with the borrower to collect payments and help the business along– and that is that.  This breed of MFI typically secures more outside funding, breaks even sooner, and even begins to turn a profit after a few years.

Moving along to our second point though, what is a micro credit-plus institution?  A micro credit-plus institution still will do the credit administration first,  but then after the credit, this breed of MFI believes that the poor need more than just money to tranform their lives.  Typical services to supplement the credit include discounted health care services, preventative health care education, literacy courses, vocational training courses, technology courses, youth programs for children of borrowers, life/disability insurance, and savings programs. The goal of providing this package of services is to help the  borrower acheive economic as well as spiritual transformation; the poor often suffer from low self-esteem, illiteracy, and many more issues that can be just as detrimental in their transformation as lack of capital is. Micro credit-plus institutions look to implement holistic and sustainable change in the lives of their borrowers.

Providing all of the above services definitely takes a toll on the particular MFI’s ability to reach self-sustainability.  But then you have to wonder, is that necesarily the  purpose of microfinance and microcredit?  Should the focus be to provide credit services to the world’s poor contingent only upon breaking even in a business model?

I worry lately that with academic giants like Stanford and Harvard chipping in their two cents on micro finance, things will move too far into the modern business mold, and too far away from the people microfinance should be helping.  Maybe because I work for a micro credit-plus institution I  am biased, but I believe that the benefits our model gives to the borrowers — the actual people we are working to help — far outweighs the negatives of not breaking even.

Microfinance was  born out of a dream to allow the poor to participate as productive members of modern society, and I believe it’s important to keep micro fianance human.  I worry that too many bottom lines, industry jargon, and stuffed up academians will take the plus right out of micro finance…

As so, in conclusion, I personally believe that micro credit-plus is a better model.  Although its merits will surely be deflated by hard numbers, theories and profit-minded people, I have seen the differences that it makes in real people down here in the Dominican Republic and Haiti, and those differences my friends, are how a micro credit-plus model keeps micro credit human.