Beyond Lending: How Microfinance Creates New Forms of Capital to Fight Poverty

Publication Date: 2007
Published by: BRAC (formerly Bangladesh Rural Advancement Committee)
Document Type: Paper

View this Document   Email this Document

A look at the “process capital” of microfinance

This article focuses on using the process capital of microfinance to design innovations that can address a wide range of constraints facing the poor.

The paper argues that:

• Innovators must design strategic linkages between microfinance and other approaches if microfinance is to be truly inclusive;
• The power of microfinance lies in the process through which it is provided, in the new forms of engagement, relationships and capacities that it creates;
• It is possible to better leverage microfinance structures and processes to facilitate other types of innovations to develop new services for the poor.

The paper presents examples from Building Resources Across Communities (BRAC) in Bangladesh, which:

• Utilized the process capital of microfinance to:
  • Develop poultry as a viable enterprise for the poor;
  • Rear livestock;
  • Get basic health services to reach the poor;
  • Help women access legal services and human rights.
• Designed socio-economic processes that create strategic linkages with microfinance. Examples are BRAC’s:
  • Time-bound food assistance program;
  • Microfinance for adolescents;
  • Microfinance for commercial sex workers;
  • Remittance partnerships.

The paper concludes that:

• The process of microfinancing through social intermediation creates valuable forms of capital that remain largely untapped;
• The process capital of microfinancing can be harnessed to address other constraints that the poor face;
• By broadening the current imagining of microfinance, it is possible to harness it more fully and thus do far more to alleviate poverty.