Healthy Women, Healthy Business: A Comparative Study of Pro Mujer’s Integration of Microfinance and Health Services

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Conventional wisdom among industry specialists is that microfinance institutions (MFIs) should specialize in financial services, leaving non-financial and human development services to other types of institutions. The logic behind this argument concerns financial self-sufficiency, as well as the dangers of overextending management and staff and diverting attention from an MFI’s core financial business. The argument assumes limited institutional capacity, the need for specialization, and the inability of human development services to cover their costs. While some microfinance institutions have provided financial and non-financial services successfully for a number of years, few have been able to convince the mainstream microfinance industry that they can offer both types of services effectively and on a sustainable basis.

This study grew out of Pro Mujer’s desire to more clearly understand and demonstrate the effectiveness and sustainability of its integrated microfinance and health services. It is based on data gathered in spring 2005. Pro Mujer is an international microfinance and women’s development organization originally founded in Bolivia. It has since expanded by creating four additional MFIs in Peru, Nicaragua, Mexico and Argentina, as well as a network support office, Pro Mujer International (PMI), in New York.

Pro Mujer operations began in Bolivia with a program that trained women’s groups in maternal-child health. The institution later introduced microfinance services, which became its central product line. Yet Pro Mujer realized that client health problems often led to problems with loan repayment, driving the institution to search for ways to integrate health interventions and financial services. After studying alternative methodologies for offering “one-stop” services to its clients, Pro Mujer decided to focus its health services on health education, primary preventive and curative healthcare. These services would be provided through health clinics established at existing Pro Mujer focal centers. After eight years of experimentation, Pro Mujer fully developed and rolled out its microfinance plus health service model. The demand for these services and their impact on clients led Pro Mujer to incorporate health services as a core MFI service and to formally include healthcare in its organizational mission.

Now three Pro Mujer MFIs currently offer a full range of microfinance and health services, as well as other human development services. While certain core characteristics define the Pro Mujer model, the organization has allowed its service delivery strategy to be adapted to local conditions in each country. This flexibility has led to three variations of direct and indirect service provision, which provide a basis for analyzing how different intervention strategies affect different outcomes, such as client satisfaction, development impact and financial performance. The study first examines the similarities and differences between health service strategies among the three MFIs and assesses how their clients and partners evaluate the benefits of these services. It then measures the financial performance of each model by segregating direct and indirect costs attributable to each service and assigning them in a systematic manner.

The study shows that Pro Mujer clients value the financial and health services that they receive. It also demonstrates that clients have improved their health knowledge and practices, and that they have better access to health services. Offering multiple services leverages Pro Mujer’s existing infrastructure, improves client loyalty and strengthens its competitive position in financial service markets. However, offering both financial and health services requires significant institutional capacity because the two programs have different management requirements.

The cost allocation exercise undertaken by this study provided Pro Mujer with detailed information to help manage its integrated services. Previously, Pro Mujer only allocated direct program costs to its health services. However, this practice simultaneously undervalued the operational self-sufficiency of its financial services and overvalued that of its health services. Following the exercise, Pro Mujer discovered that its health services could reach 142 percent cost coverage on the basis of earned income and donations, and up to 80 percent on the basis of earned income alone. The cost allocation also allowed Pro Mujer to calculate the full cost of its health services for the first time, which currently ranges from US$2 to US$9 dollars per client per year. The study concludes that integrated service models can have a positive and sustainable impact, but identifies a number of prerequisites and management issues that MFIs should consider before replicating an integrated service model or the attendant cost allocation exercise. Among other considerations, the feasibility of replication is determined by the commitment of management, institutional capacity, client demand and the operating environment.

This study is a valuable contribution to the difficult question of whether or not institutions can combine the delivery of financial and non-financial services in developing countries. It clearly illustrates the importance of developing a cost accounting methodology and provides a useful summary of advantages and drawbacks of different strategies. It is a highly recommended read for practitioners.

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