Using groups as forums through which to provide savings facilities and as channels for delivering credit is widely accepted as a successful way of overcoming many of the problems associated with providing microfinancial services to the poor. However, there is a danger of the approach being adopted with too little understanding of how groups can be used, and a lack of concern for some of the problems which may be faced. This article draws attention to the need for a greater understanding of operations in group-based microfinance, particularly where many management tasks are decentralized to the lowest level. It differentiates between the well-known Grameen Bank model and an alternative model based on larger and more flexible groups, in which a lender 'wholesales' a loan to a group, which is then left collectively responsible for on-lending smaller loans to the individual members. The potential advantages of this model over the 'Grameen' model and the potential disadvantages are explored. The article concludes that considerable lender support is required, and is likely to consist of training, advice services and monitoring, balanced with a flexibility which allows groups to develop their own systems to meet the particular needs and demands of their members.
Can commercial banks do microfinance? Lessons from the Commercial Bank of Zimbabwe and the Co-operative Bank of Kenya
During the last five years, two commercial banks in Zimbabwe and Kenya have made the decision to start microfinance operations, motivated in part by the increase in competition in the financial sector, which has encouraged them to seek new markets. This article outlines the institutional form their 'downscaling' has taken, the new loan and saving products they have introduced and their progress so far. In these cases, donor-funded technical assistance has been crucial in helping overcome considerable obstacles, including resistance to the new microfinance culture from the mainstream bank staff.
Relegated to chronic poverty: financial difficulties faced by people with mental illness in the United States
This article is about the financial difficulties faced by people living in the United States who are poor and have mental illness, and a pilot programme seeking to help them. Millions of people in the United States cannot afford to meet their basic needs, and levels of unsustainable debt are high, given low incomes and a relatively high cost of living. People with mental illness are disproportionately represented among this group, even those who receive financial assistance from the government. The pilot project focused on helping people understand and make the best use of financial services, and worked with local banks and the government to try to improve locally available financial services. The United States has a great deal to learn from the experience of global microfinance. In addition, the benefits system must be reformed to increase people’s incomes, and reduce disincentives to saving and finding employment.