Calmeadow's
Microfinance Reference Guide
This reference page contains terms that are commonly used in the fields of microfinance and microenterprise development. Meanings can vary widely from place to place so CALMEADOW surveyed over 25 institutions in the field to ensure that this list was representative and comprehensive.
Terms are grouped under 8 major headings:
Macro Environment | Ideologies of Lending | Financing | Institutional Types | General
Management | Products and Services | Monitoring and
Reporting | Impact/Target Market.
Macro Environment:
Term |
Calmeadow Definition |
| Macro-environment |
This category includes
general, country-level information that is not specific to policy, legislation,
regulation. The Knowledge Bank does not carry generic materials on development theory. |
| Formal Financial
Sector |
Policy and processes
involved with the formal financial sector, including interest rates, exchange rates,
inflation, market fragmentation and corrective measures. |
| Policy,
Regulation. Supervision, Legislation |
This involves all matters
that deal with legislation, regulation, supervision and related microfinance policy
issues. May include policy issues at the regional and national level (eg. Regarding
usury). This section does not include donor or program policy. |
| Informal Sector |
Deals with studies on the
informal sector and the micro/small enterprise sector inlcuding issues of self-employment.
|
| Development
Economics |
Dealing specifically with
the development economics only as it may affect the microfinance sector (financial crisis
analysis; trade; contributions of the informal sector to the national economy) |
| Local Government |
Legislated village, town,
municipal and county governing bodies (micro-governing bodies) and their policies or
participation in microfinance |
| Financial Crisis |
Banking crises, structural
adjustment policies, economic recessions and restructuring that create unstable and
volatile economic climates, fiscal profligacy, exchange rate mismanagement, international
financial shocks, financial liberalisation, and weakness in the domestic banking sector. |
Ideologies of Lending:
Term |
Calmeadow Definition |
| Ideologies of Lending |
General and theoretical
discussions comparing or describing the various approaches to lending. Topics dealing
individually with each ideology would be found under the respective names such as
microenterprise development. |
| Community Economic
Development |
Normally used by North
American organizations, the focus is supporting communities with goals of creating local
employment, preventing rural-urban flight and strengthening long term linkages within the
community. Microfinance and microenterprise development may be part of these strategies. |
| Microenterprise
Development |
Organizations in this
category are most concerned about fostering and strengthening a particular microenterprise
activity. These may include the non-timber forest subsector, craft/garment subsector,
agricultural, small industry and export subsectors. |
| Poverty Lending |
Here the focus is on
poverty reduction and empowerment of vulnerable groups. Usually, this method attempts to
identify the causes of poverty and address them with a range of strategies, one of which
would be microfinancial services. The target market is the poorest households in a certain
geographic area. |
| Microfinance |
The purpose of these
organizations is the extension of institutional financial services to those who are not
currently serviced. Microfinance includes the provision of credit, savings and
increasingly additional financial services such as foreign exchange, insurance and money
transfers. |
Financing:
Term |
Calmeadow Definition |
| Financing |
This section compares ways
of financing or sources of finance for microfinance operations generally. . |
| Apex Scheme |
Wholesale financing,
second-tier lending, on-lending. |
| Investment Fund |
Commercial investment in
microfinance. |
| Guarantee Fund |
Also known as bridge
funds. A guarantee fund can provide the organization's initial access to the formal
financial sector, strengthen the organization's capabilities as financial intermediaries
and provide important leverage in terms of lending capability. |
| Social Investment |
This section deals with
private investment in socially or enviromentally-oriented loan funds such as the Calvert
Group's work. |
| Capital Markets |
This section explores
private investment by commercial banks and corporate institutions in the microfinance
sector, as well as access to capital markets |
| Donors |
Donor policies on
supporting the microfinancial sector. |
Institutional Types:
Term |
Calmeadow Definition |
| Institutional Types |
Comparisons or general
discussion about institutional arrangements, partnerships and linkages for microfinance
that are not specific to a type of institution |
| Credit Unions (including
Credit Cooperatives) |
Community-based, financial
co-operatives that are normally democratic and non-profit, with savings mechanisms and
lower interest loans. Members invest in shares, giving them certain entitlements (eg.
Election of boards or voting on policy). |
| Microloan Funds |
Community loan funds or
microcredit revolving funds in North America or Europe. |
| Regulated Microfinancial
Institutions |
Regulated institutions
offering microfinancial services such as BancoSol, Mibanco, Grameen Bank, ADEMI. This
section would include non-bank financial institutions that are regulated by special laws. |
| Downscaling |
Formal financial
institutions that offer a microfinance window such as Vancity Credit Union or Hatten Bank.
This process is called downscaling. |
| Postal Outlets |
Postal outlets often offer
microfinancial services in Africa.and Europe |
| Self-Help Groups |
These are organizations
that are used as a foundation to formalize credit and savings operations such as trust
banks and/or village banks |
| Development Bank |
Generally country-owned
and state-based, these banks offered agricultural credit originally and have moved to
offer microfinancial services. |
| Non-Governmental
Organizations |
This term will not be
listed for each NGO in the database as there are too many. This section deals with
materials discussing the role, benefits or drawbacks of the NGO as a vehicle for offering
microfinancial services. |
| Technical Assistance |
Exchange of knowledge,
product and services and management technology between technical service providers and
microfinancial institutions. |
| Traditional Finance
Schemes |
Pawnbrokers, rotating
savings and credit associations, individual savings groups, tontines |
| Transformation |
Upscaling to non-bank
financial intermediary or commercial bank, institutional graduation. |
| Networks |
Affiliate members within a
community of organizations. This section discusses the importance of networking to support
microfinance, the role of networks and how to set up a network. |
| Institutional Linkages |
Interorganizational
networking, communication, coordination |
General Management:
Term |
Calmeadow Definition |
| General Management |
General management issues
deal with the overall operations, governance and policies of the institution. This key
term is used for manuals and other general guides which span a number of management areas.
|
| Interest Rate Setting |
This key term is used for
resources specifically related to setting interest rates for microfinance products. |
| Client Desertion |
This key term deals with
analysis of client exiting and desertion. |
| Financial Management |
Financial management is a
broad topic in microfinance operation management including interest rate setting, revenue
generation, cost analysis, delinquency management, profit centres, credit bureaus and
general accounting. |
| Human Resources |
This key term relates to
personnel incentive schemes, staff recruitment, profiles, establishing an institutional
culture and staff management. |
| Outreach See also market research |
Active attempt to
find/interact with clients in selected populations, geographic catchment areas or targeted
initiatives. This term will often relate to impact studies and would also include market
research and delinquency studies. |
| Marketing |
Communication of products
and services to external client population through various means, eg. Advertisements,
referrals, publications. |
| Governance |
Anything related to the
activities of governing the organization (eg. Board of directors, bylaws, and so on) |
| Sustainability |
Organizational financial
and operational self-sustainability meaning the ability to cover costs plus the imputed
cost of capital and other expenses; long-term organizational viability. |
Products and Services:
Term |
Calmeadow Definition |
| Products and Services |
This includes practical
manuals and institutional profiles for management, client monitoring and methodology
development. |
| Loan Procedures |
Lending policies and
procedures, including client selection, paperwork, terms |
| Village Banking See also credit-plus
|
This is a type of lending
founded by John Hatch that organizes people into groups based in their communities for
lending. Some village banking programs focus on minimalist and other use credit
‘plus’ schemes (eg. Credit with Education) – programs that offer additional
programmes or components with credit. |
| Individual Lending |
Single-client lending
where repayment relies solely on the individual. |
| Group of Groups Lending See also group lending, solidarity group lending, peer
lending |
Grameen lending is a well
known form of group of groups lending. It utilizes a combination of peer group methodology
and village banking. |
| Business Development
Services |
Support services that
contribute to the growth of enterprises (eg. business planning, client training,
networking, marketing technical support) |
| Savings Development |
Creation and process of
client savings schemes (including mandatory savings schemes) |
| Other Financial Services
Development |
Innovative services for
microcredit clients – eg. microleasing, insurance, money transfers |
| Client Graduation |
Microenterprise growth to
medium-size enterprises and financial self-sustainability. The dynamics of microenterprise
change of time. |
| Transaction Costs |
Imputed costs from
organizational operations and activities in relation to client services and other
organizational interactions (eg. Processing fees) |
| Peer Lending See also peer lending, solidarity group lending, group of
groups lending |
Peer lending relies on the
peer pressure of group members to act as a guarantee in place of more traditional forms of
collateral and credit scoring. |
| Training |
Staff training regarding
microcredit methodologies, case management, etc. May be senior staff, field staff or loan
officer training. This does not include client training which would be found under
business development services. |
Monitoring and Reporting:
Term |
Calmeadow Definition |
| Monitoring and Reporting |
Management of the
organization’s internal processes. This key term is a general catch-all for the
following key terms. It is more general than MIS because it deals with issues beyond the
technical system of monitoring. |
| Management of Information
Systems |
The organization of
institutional processes (primarily computer-oriented). |
| Audit/Control |
Examination of
organizational input/output cash flow (ie. internal audits, external audits, fraud
investigation). |
| Performance Standards |
Organizational performance
indicators/ performance standards. |
| Software Programs |
Microeconomic/microenterprise/microcredit-specific
computer software programs (mostly financial, program planning and accounting-based). |
| Ratio Analysis |
Financial ratio analysis
tool that examines organizational sustainability, efficiency and portfolio quality. |
| Rating |
This refers to external
rating processes such as CAMEL. This is distinct form of audit which refers to internal
review or analysis. |
Impact/Target Market:
Term |
Calmeadow Definition |
| Impact/Target
Market |
This category
investigates the effects of programmatic activity on specified client populations. It also
includes how to design programs for a specific client group. |
| Research
Methods |
Methods of
quantitative/qualitative analysis, including subsector analysis, market research, action
research, participatory methods, case-studies, client surveys, impact analysis, national
surveys, and gender analysis |
| Post-Conflict/Disaster |
These
resources discuss microfinance and relief strategies in a post-war/post-natural disaster
stage context when countries are economically vulnerable and unstable |
| Indigenous
Populations |
Focusing on
the unique microfinancial needs of First Nations, Native Americans and Aboriginal
populations |
| Islamic
Communities |
Communities
of the Muslim faith (political and/or cultural) that practice Islamic microfinance
methodologies regarding entitlement considerations (eg. musharaka, muradaba) because they
reject the concept of fixed interest rates. |
| Resource-Dependent
Communities |
Ie. Primary
resource-dependent communities, eg. fishing, forestry communities. These resources discuss
microfinance as an alternative to activities that are heavily dependent on natural
resources. |
| Gender
Relations |
Focuses on
women’s bargaining power within the household, power imbalances between the genders,
effects of microfinance on gender-related issues, empowerment and/or ill effects on women,
girl/child issues. (Also cross-listed as ‘women’.) |
| Health |
This
literature deals with the relationship between microfinance and health (nutritional
levels, infant and maternal health, disease and disability). It may relate to the effects
of microfinance on health or how to design programs with these issues in mind. Freedom
from Hunger's Credit with Education program would be found here as it uses micrcredit to
improve nutritional levels and reduce infant mortality. |
| Rural |
This
literature deals with the unique design challenges of rural microending. It also discusses
the differences between agricultural style lending and microfinance. |
| Urban (also
peri-urban) |
This
literature discusses unique design issues related to microlending in urban (as compared to
rural) cities, particularly inner-cities and peri-urban sprawl areas. |
| Street
Vendors |
This
literature focuses on self-employed street vendors such as cart/sidewalk hawkers, market
vendors |
| Youth |
People
between the ages of 15-24 (including issues such as street kids, exploitation, education,
special services) |
| Disabled |
This
literature deals with how to provide microfinancial services for the physically and
mentally disabled |
| Risk
Reduction |
|
| Poorest of
the Poor |
Dealing with
those at the 5th income quintile, ie. those surviving on a day-to-day basis
without ensured food, shelter, healthcare, education and so on. This literature discusses
some of the trade-offs of a sustainbility approach for the most vulnerable. Some
literature argues that the poorest of the poor should not receive microfinance but a blend
of services. |
| Food Security |
This
literature relates microfinance to household food security in terms of effects and design
issues. Discussions include caloric
consumption, vulnerability, coping and livelihood strategies and deliberate actions of
household decision-makers when faced with insufficiency. |
| Empowerment |
Impact of
design for political participation, legal awareness, ability to exercise personal and
socio-political rights and freedoms. |
| Impact Level |
The systemic
level at which change can be quantified or qualified implying causality. |
| Household |
Impact on
income levels, education, cash flow and savings acquisition at the household level. |
| Environment |
Impact of
programs on the natural environment, creation of environmental initiatives. This
literature includes environmentally-focused loan funds. |
| Microenterprise |
Impact of
credit/enterprise interventions on specific microenterprises regarding productivity, use
of technology, sustainability, success rates, income levels, sale |
| New
Immigrants |
Impact and
design issues for landed immigrants/refugees or displaced people |
| Welfare
Recipients |
Impact and
design issues for people in receipt of social assistance money and other transfers |
|