The paper seeks to improve understanding of the extent to which sustainable microfinance programmes reach poor households and contribute to poverty reduction. It focuses on selected non-income dimensions of poverty, specifically those related to risk, vulnerability, and assets. Main implications of the study point to means to improve microfinance products, services and delivery mechanisms. They show the need to:
* Match products to clients' needs by developing financial products, services, and delivery mechanisms that meet the financial needs of a wider spectrum of households
* Match repayment amounts and cycles to clients' needs to improve a client's capacity to repay and borrow over the long term and thereby reduce the risk of borrowing for them, as well as reduce the risk of lending for the MFI
* Match loan size to clients' needs: Poorer borrowers need flexible and timely products with bite-size, manageable repayments. For better-off households, larger loan sizes could enable them to take advantage of investment opportunities with potentially higher returns
* Examine the demand for individual loans to offer alternatives to the high borrower transaction costs associated with group lending systems
* Increase services to vulnerable non-poor households :Economic stress events and shocks can push this group below the poverty line while they are in a better position to take risks and invest in employment-generating enterprises
* Examine financial flows and repayment cycles by looking more closely at the match between household financial and investment flows and loan and repayment cycles
* Broaden the range of products and services: Improved housing and education are perceived as pathways out of poverty for the poor, suggesting the potential for developing housing and education loans or savings products
* Increase product flexibility, focusing on emergency loans which could help clients recover from such events more quickly as they continue to pay their loans and stay in programmes
* Provide insurance products as study results suggest a potential role for insurance products to help clients cope with frequent, idiosyncratic risks such as ill health or death of a family income earner. All are potentially insurable risks
* Increase individual savings opportunities: there is a role for more accessible and private savings that are not linked to borrowing and that can be used to deal with anticipated and unanticipated risks and day-to-day economic stresses
