'Rethinking Multiple Borrowing' – Daniel Rozas Blogs on MF Focus

> Posted by Center Staff

Haitian vendors at work in Port-au-Prince, Jan 20, 2010

Haitian vendors at work in Port-au-Prince, Jan 20, 2010.

Besides containing a nice nod to the Smart Campaign‘s work on a process for certifying MFI client protection practices, Daniel Rozas’ post  “Rethinking Multiple Borrowing” on MF Focus offers a fresh take on a much-mulled topic.
Rozas, who recently authored the report “Weathering the Storm”  for the Center for Financial Inclusion, argues that despite press reports to the contrary, multiple borrowing is not the result of “heavy market penetration, or even saturation.”
Rozas looks at the phenomenon through the lens of Haiti, which he recently visited. (His post therefore brings to mind Alex Counts’ book project on Fonkoze, the Haitian MF pioneer.) Rozas begins his post:
Some time ago, I had a conversation with a microfinance investor.  What is the greatest challenge facing the sector? – I asked.  His answer:  multiple borrowing – multiple borrowing getting people into too much debt; multiple borrowing transforming micro-enterprise lending into consumer finance; multiple borrowing rewriting the traditional relationship between MFIs and their clients.
Of course, multiple  borrowing is present in all of these cases.  But thinking about multiple borrowing along these lines misunderstands the basic situation. Multiple borrowing isn’t a reflection of some recent or extreme developments to be ascribed to runaway growth, greed, or willing ignorance.  Nor is it some foreign element to be excised from microfinance.  No, multiple borrowing is an intrinsic part of the practice, one that has been with us for years.  Nor, despite press articles to the contrary, is it a result of heavy market penetration, or even saturation.
This is a realization I came upon during a recent trip to Haiti.  Haiti, you see, is a relatively unpenetrated market, with peak numbers on MIX showing about 120,000 borrowers, or about 1.2% of the population.  And yet the feedback from loan officers on the ground was that multiple borrowing is widespread, some suggesting that as many as 50% of their clients have loans with other MFIs.  And this wasn’t a case of saturation in one place and nothing elsewhere – I heard similar stories both in the capital and in the regions.
Haiti is full of informal markets and businesses that make up the heart of a traditional microfinance portfolio.  Demand is clearly there.  But given the spread of multiple borrowing, the true penetration numbers suggest less than 1% of the population – far below the numbers of other (stable) microfinance markets.  This level of penetration is very low indeed.

You can click this link to head for MF Focus and read the rest of Rozas’ “Rethinking Multiple Borrowing.”
Image credit: Fred W. Baker III
Have you read?
 The Center’s Best-Kept Secret: The Country-by-Country Client Protection Library (includes Haiti)
The Smart Campaign to Launch a Certification Program for Client Protection in Microfinance
On the Anniversary of the Haitian Earthquake: Fonkoze and the ‘Super Poor’