Microfinance and street children: is microfinance an appropriate tool to address the street children issue ?

2.3.5. Effectiveness, sustainability and provision model

When discussing «effectiveness» and «sustainability» in our section 2.2, we were pointing out how those two criteria need to be kept in mind whenever discussing microfinance for street children.

The comprehensive microfinance framework for street children we are proposing tries to meet at best those two criteria, by finding a system which increases the impact on street children, taking into account the limited amount of subsidies and the need therefore to minimize costs and to have a sustainable program. But as we have seen previously, even with the last criteria in mind, the holistic approach needed keeps the program at a high cost, keeping therefore difficult to reach financial sustainability and consequently a constant dependence on subsidies. So, at this stage, two questions need to be raised:

a. What is the added value brought by this new approach? In other words, why should a particular donor support such activity, comparing to a traditional one?

Since the street children predicament appeared in developing countries in the 80s, many NGOs tried to approach the issue by, first, relying on a paternalistic approach taking its roots from the Western model of childhood, where the objective was to «protect» the child and to provide only with emotional, physical and intellectual development services. The assumption behind this approach is the lack of responsibility of the street children, who do have nothing to say, but just to keep receiving services until they reach adulthood. But those street children, as pointed for instance in our chapter 2, do have high responsibility towards their families, and it is often for this reason that they are on the street. Witnessing this, some NGOs began to worry about the appropriateness of intervening in the street children life only by providing social services, and tried to help street children, usually engaged in hazardous work, to find a better survival strategy, by giving them training an finding jobs. Then appeared the third movement which, taking into account the necessity to provide training, did find inspiration in the microfinance movement which emerged in the 90s, and thought effective to add to the actual framework of intervention two components: «savings» and «credit».

The added value of this new framework of intervention is structured around the notion of «economic empowerment» which tries to find solutions to a complex problem by relying first on the children themselves.

This new approach tries therefore to assist street children, whenever keeping in mind the necessity to give them tools which will improve their future. Among the various added value, we could say that:

1. By providing saving, the street child can meet his/her life-cycle needs, emergencies and opportunities whenever keeping him/her safe for robbery and getting involved in criminal activities, reducing as a consequence his/her vulnerability.

2. By providing credit and launching a successful business activity:

#177; The street child' self-esteem and confidence will be increased

#177; The street child will be protected from hazardous street working activities

#177; The will be more able to raise a high income and to support him/herself as well as his/her family more efficiently

#177; The socialization process will be efficient, as the child would be perceived by his/her community as a responsible person.

Finally, we must recall that the effectiveness of this intervention can only appear by keeping a particular attention to the respect of each step, in order to avoid the supply-driven demand, as well as the mitigation of positive impacts.

b. MFI vs. YSO: Which provision strategy is the most sustainable?

The microfinance framework we are proposing is said to be effective (i.e. positive impact) and sustainable (i.e. minimizing cost), non regarding the organisation which is providing it.

However, as pointed our in our section 2.2.2, there is another component of sustainability which, if brought in our framework, can enhance the program sustainability: the «ability and commitment of the organisation to keep delivering the adequate services in the long-term». Indeed, even if any organisation can, by adopting our model, create a positive impact on the street children, and in the same time minimizing its costs of intervention, we need to seek which type of provision strategy will be the most adequate one for guaranteeing these criteria.

From the provision side, we have, as pointed in the beginning, two potential actors: MFI and YSO.

From a MFI perspective, launching a successful microfinance program for street children alone and keeping it viable means three things:

1. Hiring additional staff able and committed to serve street children

2. Providing social services to street children

3. Providing vocational training to street children

From a YSO perspective, launching such a program means:

1. Changing its working philosophy, moving on to a subject-oriented approach.

2. Consuming time to the actual staff or increasing the number of staff needed

3. Providing training to the staff in order to in order to manage adequately the provision of financial services and to provide entrepreneurship and management training to street children.

4. Provide production or service oriented training

Therefore, we are in presence of what we can call a «management dilemma» where, on one side, we have an MFI which has an expertise on financial services (and sometimes training services) but no expertise at all on street children; on the other side, a YSO has the expertise on street children, but few (or no) expertise on microfinance. How can we therefore reconcile this dilemma? Keeping in mind our objective of street children well-being maximization, we would argue that two sustainable provision model can exist:

ü YSO focus: our operational requirement implies that social services HAVE to be provided, otherwise the program will never be operational. As YSO do already provide such services, it makes more sense to initiate such activities in YSO, thanks to the economies of scale^85(*). Indeed, as their constraints are much in terms of staff, if the staff is well trained, the major costs disappear. The only high cost is the production and service oriented training, but outsourcing it can be a profitable solution. Given this, the more there will be subsidies, the higher will be the effectiveness. Second, it can be more valuable in terms of economies of scope, as more street children can be reached for each dollar spent (as the YSO has already a «pool» of street children)

ü YSO/MFI partnerships: Even if our previous suggest that it can be more sustainable for a YSO than for a MFI to launch such activity, partnerships can be, in our view, extremely valuable. It can take the form of a «capacity-building» relationship, where the MFI would help the YSO to design and deliver its products. Indeed, for an MFI, helping the poor may also mean helping those who serve the poor as well. Moreover, a particular element to consider is how gainful too can this partnership be for the MFI: as pointed by Hatch (2004) the youth of today are the adults of tomorrow. The street youth of today can therefore be the adults' clients of tomorrow, if the organisation is closely linked to the YSO, and if the street children are well aware about that.

Fig. 3.6-Visual summary: our effective and sustainable MF for street children model

YSO

YSO/MFI PARTNERSHIP

COMPREHENSIVE MF PLUS FRAMEWORK

STREET

CHILDREN

* ⁸⁵ «Economies of scale» are related terms that describe what happens as the scale of production increases. They are different terms and not to be used interchangeably. ( http://en.wikipedia.org/wiki/Economies_of_scale). Here, the input is the amount of subsidy, and the output is the effectiveness