1a) i. Briefly explain the term collateral substitute and why it is necessary in micro lending [3 marks ii. Identify and discuss any two (2) reasons why the poor are often described by universal banks as unbankable. [2 marks] b) i. What is progressive lending? 14 marks ii Give two (2) disadvantages associated with progressive lending. [2 marks]

(c) i. Briefly distinguish between voluntary and involuntary exclusion [6 marks] ii. There is a long standing debate on the interest rates charged on micro loans.Whereas some argue that interest rates on micro loans should not be high, others are of the view that it should be high. As a micro finance scholar, explain the two positions to a layman. [8 marks]

(d) i. Explain the term downscaling as used in the micro finance literature. ii. Briefly explain any two (2) disadvantages associated with setting up a microfinance subsidiary as a downscaling approach [2 marks]