The Marginal Cost of Integrating Microfinance with Education Using the Unified Approach

Credit with Education is a methodology that integrates two services: financial and non-financial – where the fundamental purpose is to achieve a greater socioeconomic impact on its clients. This paper contends that credit is a very important resource to address obstacles related to poverty and an optimal instrument to achieve sustainability in any microfinance institution. However, the paper also notes, it is not sufficient – it argues that low income people, who are socially isolated, lack self esteem, have limited business experience, and have deficient health and nutritional conditions, need more than financial services. The living conditions of these people not only limit their possibility to become good clients, but also prevent them from developing the knowledge and skills to address their condition.

The paper suggests that while credit can make an institution sustainable, training consolidates its sustainability. Several experiences have demonstrated that non-financial services are closely related to satisfaction, loyalty, and indexes of client default. It is noted that the organizations that work with the Credit with Education services have demonstrated that through this integrated service, it is possible to render efficient educational services during the group borrower meetings. In this way, not only is the efficient use of resources achieved, but also the consolidation of an institution with social objectives.

In this paper, cost analysis and the results obtained from the credit with education service are examined. To this purpose, the successful experience of CRECER—a Bolivian institution that works with the unified service approach and has consolidated this service—is used. In the first part of the document, an analysis of the different forms of integrating education with financial services is presented. The second part consists of a description of the methodology used by CRECER, which allows a detailed understanding of the procedures used by the institution to provide the service. The third part presents a cost survey of the educational component – this survey was conducted by CRECER – and also sets out the method used for the cost estimate and the results achieved.

Finally, a series of conclusions are presented that go beyond the cost analysis. These include the author’s reflections and arguments related not only to the investments of financial services, but also to the results and impacts generated by them.

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