3.3.2 The Financial Sustainability Mission
Microfinance institutions are expected to generate sustainable income, reduce administrative costs, develop staff competences as well as those of their clients, charge sustainable interest rates as well as enhance attraction of savings which form the bedrock for extending loans and advances to clients at market rates.
3.4 Financial and Social Intermediation
Financial intermediation refers to the process of channelling funds from units with surplus to those that are in deficit at a given time. In microfinance practice, the financial intermediation process involves dealing on such microfinance products for the purpose of providing credit for working capital, fixed assets, savings, insurance, leasing, and pension.
Social intermediation is an attempt to bridge the social gap between the various economic levels, raising the socio-economic capacity of the poor or low-income persons through training, education, health and other forms of socio-economic awareness to enhance their capacity. Social intermediation is achieved through group formation, training and capacity building as well as enterprise development in the areas of business plan preparation, basic accounting, records keeping, marketing, literacy, health and education.

4. Town and Gown Nexus in Microfinance: A Conceptual Framework
A good conceptual framework enables other researchers to understand and appreciate the links between or among key concepts by showing how behavioural and systemic or structural concepts are bridged and mediated. Such a conceptual framework proves that the researcher has a clear understanding of the connections between theoretical ideas (concepts, frameworks, typologies) and the empirical materials (the data, information) that are found in the study, especially when behavioral and structural concepts are well linked to explicate the nature of social reality.
The relationship between Town and Gown in social contexts has been a persistent theme in economics, psychological and sociological theory and conceptual framework development (Coleman, 1990). In order to understand the Town and Gown nexus in microfinance, Social Exchange Theory (SET) is used to develop and explicate the interrelationship between Town and Gown. The Social Exchange Theory postulates that exchange involves a series of interactions that generate obligations (Emerson, 1976). Within SET, these interactions are usually seen as interdependent and contingent on the actions of another person (Blau, 1964). Social Exchange Theory also emphasizes that these interdependent transactions have the potential to generate high-quality relationships in different contexts. The theory also proposes that the relationships which parties choose to create and maintain are the ones that maximize our rewards and minimize our costs. According to this Theory, parties are more self-centered and not necessarily concerned with equality.
The basic idea is that relationships that give us the most benefits for the least amount of effort are the ones we value the most and are likely to keep long-term. For exchange to take place and sustained, there are pre-conditions for it:
• Rules and norms of exchange,
• Resources of exchange, and
• Relationships that emerge.
Rules and Norms of Exchange: One of the basics for any social exchange is the Rule of Norms of Exchange. For any relationship to be established and sustained, parties must abide by certain “rules” of exchange. Rules of exchange form a “normative definition of the situation that forms among or is adopted by the participants in an exchange relation” (Emerson, 1976). In this way, rules and norms of exchange are “the guidelines” of exchange processes. Two tenets of this rule are Folk belief and individual orientation and interpretation of reciprocity. There are cultural beliefs from which individual orientation emerges to subjectively defined expectation in any relationship. For any relationship to take place, parties often reach an equilibrium in their belief and orientation of reciprocity.
For the Town and Gown nexus in microfinance, it is expected that the Town and Gown must first have perceived or subjectively defined a level of equilibrium in the expected reciprocity of the relationship. If the expected reciprocity is not balanced, the relationship may suffer and may take long time to be established. Often, one of the parties would compromise to sustain the relationship or a third party provides the compromise for the relationship to start or to be sustained. The history of microfinance suggests that Town and Gown never reached equilibrium but the nexus was provided by third parties like development agencies, Non-Governmental organizations and other charity Organization or in rare case driven by individual with strong passion to work with the poor.
Although folk belief and norms and individual orientation tend to construct and sustain equilibrium in any exchange, the rule of negotiation is what helps parties to examine alternative resources for any exchange. This takes us to the next rule which is resources of exchange. Before parties reached equilibrium in their relationship, they are often engaged in rational calculation of cost and benefit of the relationship, given available resources. Parties often construct benefits both in long and short terms before starting any relationship. In social exchange, resources are not only what the parties invest in any relationship but what they can also take from the relationship. Consequently, the parties are either seeing each or one another as resources to reach certain goals. There are cases where social exchange takes place not because the parties have resources but because their relationship (coming together) enables them to exploit a particular resource.
Resources may not always be in form of tangible or financial benefits but include socio-emotional and economic components. The economic components of resource comprise of tangible and financial benefits, while the socio-emotional components are the social and emotional attachment to, identification with, involvement in and commitment to relationship as parties interacts or works towards a common goal. In exchange that involves organizations, Eisenberger, et al., 2001; Farh, et at., (2007) referred socio-emotional components as affective commitment which is the greatest asset of any organization and accounts for highest rated factor for staff engagement and commitment to the organization’s vision and mission statement. The lack of or insufficient socio-emotional resources may lead to poor relationship as well as breakdown in any social or financial exchange. Thus, tangible resources speed the development of social exchanges but its growth and sustainability is highly dependent on level of socio-emotional components.
Interestingly, the concept of socio-emotional resource in social-exchange may not have more relevance in any discourse than in the microfinance nexus – in the Town and Gown Relationship. Till date, microfinance is seen as social entrepreneurship/business and the founders of great microfinance banks/institution possess high levels/degree of socio-emotional resource which is commonly referred to as “passion for the poor and the poorest. On the contrary, CEOs and investors with limited socio-emotional resources for social exchanges but with high economic or driven financial gains find microfinance relatively frustrating and barren. These two components of resources for social exchanges construct how members of Town and Gown react to microfinance. I am persuaded that members of the “Gown” seem to be driven by economic resources than the socio-emotional resources. This is very transparent in that in Nigeria no faculty of the Gown has put structure or attempt to take microfinance as a department – though some have started rolling out post graduate courses in Microfinance. In the same vein, the “Town” for many decades, did not believe in the folk and norms and individual orientation of microfinance reciprocity.
Finally is the relationship that emerges: The social exchange theory postulates that relationship that arises from negotiation can only be sustained when economic and socio-emotional resources outcomes address the concerns of involved parties. It is more of rational calculations for a relationship to be established especially in a business setting but more commitment to nurture and see the relationship grow to maturity. Relating this to Town and Gown relationship nexus in Microfinance, affective commitment is the key to setting and growing microfinance. Town and Gown can only appreciate the developmental stages and the associated challenge of microfinance when they (Town and Gown) share the affective or socio-emotional outcomes of microfinance exchange.