The challenges of group-based microfinance and suggestions for improvement
Marr, Ana (2011) The challenges of group-based microfinance and suggestions for improvement. In: Contemporary Microfinance: Institutions, Policies and Performance, 5-7 Sep 2011, Cairo, Egypt. (Unpublished)
Marr-presentation-Egypt-5-7Sept2011-fv.pdf - Presentation
PDF (Conference programme)
Final_program-EgyptConference.pdf - Supplemental Material
For some years, contemporary microfinance schemes worldwide have been persuaded to aim at achieving both, and simultaneously, financial sustainability and poverty reduction. In group-based microfinance, success in attaining these goals is crucially dependent on the sustainability of groups as organisations. This paper argues that as mounting tensions arise between financial sustainability and organisational sustainability, this produces fundamental instability within groups and a tendency for the system to collapse. What is more, tensions tend to lead to the fracturing of groups and greater exclusion of the poor, creating negative impacts on wellbeing.
Based on original data collected during fieldwork in the rural communities of Cusco and semi-urban shantytowns of Lima, Peru, during 2000-2001, the study comprises a total sample of 480 individuals randomly selected from a Communal Banking programme called La Chanchita. Methods for collecting information included quantitative and qualitative tools such as surveys, in-depth interviews, focus groups and participatory observation, in order to obtain a comprehensive understanding of the internal dynamics of groups and to crosscheck information. Results and analysis were compared and contrasted with other similar organisations in Asia, Africa and Latin America.
Some key questions are addressed in order to attempt to find alternatives for improvement:
• How can tensions between financial and organisational sustainability be minimised?
• What types of incentive structures can be put in place to strengthen groups?
• How can different financial and non-financial services be combined to help attain the dual purpose of financial sustainability and poverty reduction?
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