GLOSSARY

OF
MICROFINANCE
BY
ANKITA SINGHAROY

UNDER THE GUIDENCE OF:

PROF. S. K. PANDA

INSTITUTE OF MANAGEMENT & INFORMATION SCIENCE

BHUBANESWAR
 GLOSSARY OF MICRO-FINANCE TERMS
Term Definition
A
Ability to Pay: A fuzzy concept that does not correspond in social science usage to
what we would infer from common sense. Whether or not someone
commands enough resources to contract a transaction (cash or credit) is
not what is usually meant by the phrase. Ability to pay is a subjective
judgment predicated on some assumption as to what people ought to
pay. Thus, the low-income clients are said to have a lower ability to pay
than middle-income earners, irrespective of whether or not they buy the
good/service. It is unclear whether the exponents of the ability-to- pay
concept would agree that making credit available increases such ability.
See willingness to pay. Source: Virtual Library on Micro credit

Accumulating Savings Informal savings groups that resemble ROSCAs but are slightly more
and Credit complex. In an ASCA, all members regularly save the same fixed
Associations (ASCAs): amount while some participants borrow from the group. Interest is
usually charged on loans. ASCAs require bookkeeping because the
members do not all transact in the same way. Some members borrow
while others are savers only, and borrowers may borrow different
amounts on different dates for different periods. If members pay interest
on their loans, the return to savings has to be individually calculated and
fairly shared among the group. Source: CGAP( Consultative Group to
Assist the Poor)

Active Clients: The number of clients with loans outstanding on any given date. An
institution's official statistics on active clients are usually recorded as the
number of clients with loans outstanding on the date its financial
statements are filed. Source: ACCION

Active Loan Portfolio: The total amount loaned out less the total amount of repaid loans; i.e.,
all money that is "on the street" or owed to the institution in the form of
loans on the date the report is filed. Source: ACCION

Affordability: A variant of the ability-to-pay argument requiring value judgments

about the distribution of income. If something is "unaffordable" to poor
people this might mean they should not purchase it even if they choose
to! The argument is that it will reduce the income they have available to
spend on other goods and services the evaluator considers socially more
valuable. Thus, poor people neither “should not” smoke nor drink nor
buy entertainment with subsidies provided by the government to
compensate for income inequalities. Implicit is the idea that the
donor/benefactor should make pricing decisions that correct for an
inequitable distribution of income. This in turn implies that when prices
are less than costs, someone must ante up a subsidy to cover the
difference the amount a consumer will pay for a particular quantity of a
good or service. In consumer demand theory, willingness to pay
automatically implies ability to pay. In contemporary social science
writing, "ability to pay" is sometimes contrasted with willingness to pay.
The implicit assumption here is that even though people are willing and
actually do pay a certain amount, they lack the ability to pay because
they should have spent this money on something else. Buying the good
(e.g., water) results in a loss of consumption of some other good or
service and places the purchasers further below some socially defined
minimum-consumption standard. Source: Virtual Library on Micro