Impact of group dynamics on microfinance sustainability: the case of Peru

Marr, Ana (2011) Impact of group dynamics on microfinance sustainability: the case of Peru. Journal of Development Effectiveness. ISSN 1943-9342 (Print), 1943-9407 (Online) (In Press)

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Abstract

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. The paper argues that as mounting tensions arise in the internal dynamics of microfinance groups, this profoundly impacts on the stability of groups and produces 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 from Peru, the study comprises a total sample of 480 individuals. Tentative suggestions for improvement are also advanced.

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