Microfinance Delivery Methodology (PD7356)

This metric is intended to capture how organizations operating in microfinance (and primarily those providing lending services) deliver financial services.

With an individual lending methodology, a loan is made to an individual borrower who is solely responsible for its repayment.

With a solidarity group lending methodology, funds are disbursed to groups, with collection of repayment either from the group as a whole or from the individual members of that group. Borrowers in such groups often bear joint and several liability for the repayment of all loans to the group and its members. See the glossary term for additional information.

With a village/self-help group lending methodology, the organization provides access to credit and savings services through group- or community-managed associations. The organization may lend to the group, which in turn uses the provided funds to lend to its members. See the glossary term for additional information.

With agency banking, the organization extends their branch network to more distributed populations (e.g., rural populations) via authorized agents (branchless banking). Benefits of this methodology include cost-effectiveness, risk management, product availability, improved financial inclusion, and a wider customer base.

With licensed agents, individuals or businesses are empowered to act on behalf of a financial service provider (FSP) to perform certain financial or administrative transactions. They may have a direct contractual relationship with the FSP or may be contracted by a third party (a super-agent or aggregator) that maintains a service agreement with the FSP.

Roving staff/mobile branches serve customers outside of branches in their places of residence or business. They may or may not be associated with a particular branch. This methodology includes only staff or mobile units that manage deposits or handle opening customer accounts (other than loan origination).

With ATMs (automated teller machines), customers access services via machines at fixed locations through different means of identification (card, PIN, biometrics). ATMs offer different kinds of cash- or non-cash-based operations (such as deposits, withdrawals, transfers, and account balance consultation). ATMs may be proprietary or managed by third parties.

With mobile banking, clients access services through Unstructured Supplementary Service Data (USSD) or Short Message Service (SMS) communications via their mobile devices.

With Internet-based banking services, clients access services through a personal device (smartphone app or website) using standard Internet protocols.

With merchant POS (point-of-sale) or network, a merchant uses a physical payment processing device, located at the merchant’s place of business and connected to a network, to accept payment for the sale of goods or services from customers of the financial service provider using their means of identification from the FSP (card or other). The merchant could be owned directly by the FSP or simply have access to a network enabling the merchant to process payments.

Organizations using an ‘other’ approach to delivering microfinance should describe the method or approach used.

Organizations can refer to the following resources for additional guidance:

-Microfinance Information Exchange: Measuring the Performance of Alternative Delivery Channels (https://www.centerforfinancialinclusion.org/about/what-we-do/mix)

-International Finance Corporation: Digital Finance (https://www.ifc.org/wps/wcm/connect/Industry_EXT_Content/IFC_External_Corporate_Site/Financial+Institutions/Priorities/Digital+Finance)