The 2005 Aga Khan Agency for Microfinance Annual Report

THE MICROFINANCE “LADDER”AKAM’s philosophy in the delivery of microfinance is to deployinstitutional vehicles that are appropriate to the local context andaccount for the size and scope of the intended beneficiary communities.As these beneficiaries advance in their development andbegin to require a wider range of services, the institutionas alsoadvance in their development. This process involves an evolution,which can be divided into three categories:1. Entry-level microfinance programmes, usually at the communitylevel, which are designed to give people the means to startor expand economic activity and, over time, diversify beyondtraditional microenterprises.2. Autonomous microfinance institutions with a more formalstructure and a network of sub-branches.3. Microfinance banks, which are regulated entities that lend tomicro and small enterprises and offer an array of services comparableto, and in some cases even broader than, those of localcommercial banks.While microfinance activities are typically delivered through smallintegrated programmes in the initial years, these integrated programmesevolve over time into self-standing, legally independententities and eventually into regulated microfinance banks offeringa range of services. Bank structures are generally preferredfor long-term delivery of microfinance services because of theirrobust institutional arrangements and their capacity to mobilisea broader range of financial resources.ABOVE: ENTRY-LEVEL PROGRAMMESSUPPORT AND HELP PEOPLE START OREXPAND ECONOMIC ACTIVITIES.MIDDLE: MICROFINANCE INSTITUTIONSARE OFTEN ABLE TO PROVIDE BOTHInstitutional evolution is therefore accompanied by portfoliogrowth and the broadening of services. In the process, beneficiariesbecome aware that the institutional changes underway offergreater benefits to them in the form of a wide range of servicesand access to larger funding amounts, among others.CREDIT AND SAVINGS SERVICES.BELOW: MICROFINANCE BANKS AREREGULATED ENTITIES THAT OFFER ANARRAY OF SERVICES COMPARABLE TOCOMMERCIAL BANKS.RIGHT: NUMEROUS WOMEN'S GROUPSIN THE KYRGYZ REPUBLIC HAVE RECEIVEDHANDICRAFT TRAINING AND LOANS.18