Flexible Micro Finance Program: Effectiveness and Efficiency to Reach the Extreme Poor

Abstract

Following widespread criticisms of the conventional MFI framework, Plan Bangladesh, an INGO devised a flexible credit scheme characterized by door to door collection of deposits and loan repayments on a day to day basis. The scheme departs from the joint liability mechanism practiced by traditional MFIs in an effort to disburse services to the ultra poor, who are often excluded by community screening mechanisms as well as service providers. This paper aims to test the viability of a flexible scheme offering products developed through participatory market research targeted at individuals. We find the scheme to be highly effective, enhancing income of ultra poor households as well as providing adequate leverage for asset accumulation.