What’s Happening with Group Microfinance?

> Posted by Beth Rhyne
[Pt. I of a two-part series. Pt. II, by Steven Werlin of Fonkoze, will appear tomorrow.]
Fifteen practitioners and experts gathered in Valladolid, Spain on Sunday, before the Microcredit Summit, to consider this question, and I sat in.  Group methodologies are coming under criticism by those who think they lead to over-indebtedness and provide rigid, inflexible products.  The practitioners in the room, from Haiti, Bolivia, South Africa, Tanzania, Uganda, Georgia and India, convinced me that there is a lot more going on in group microfinance than those stereotypes suggest.
Some providers see groups as delivery mechanisms for a range of financial services. ESAF in India, for example, offers or facilitates microloans, housing loans, savings, insurance and pension products. Other providers, like ProMujer, take an even broader view. They see groups as a channel for addressing the multiple access gaps that define poverty and as providing an experience of empowerment.
“You have to get the finance right,” said Lauren Hendricks of CARE, explaining that financial services anchor groups that can then expand to additional services. However, Lisa Kuhn of Freedom from Hunger said, “If groups are only about financial services, they will go away.”
“It all comes back to what you are trying to achieve,” offered Anne Hastings of Fonkoze. Some organizations set financial service delivery as their purpose, while others aim for client transformation, and organizations with different purposes will use groups in different ways.  “If delivery of financial service is all they’re in it for, then offer technology.” Technology, presumably, could solve transaction cost problems that were the part of the original reason for group loans.
This led to a discussion of the uneasy relationship between group microfinance and technology. Clients still spend many tedious hours in group meetings counting money and recording repayments. But it is possible to integrate technology into the group methodology. Felistas Cotinho of Tujijenge describe how SMEP, a Kenyan MFI, asks clients to make repayments via mobile phone (M-PESA) before the group meets, freeing up meeting time to focus on those with repayment problems and to carry out other meaningful work. As Veronica Namagembe of Pride Uganda noted, a relationship requires giving as well as taking, and group meetings otherwise focused on repayments need a positive, motivating focus. Carmen Velasco of ProMujer described the value her clients see in supporting each other and talked about bringing third-party service providers to group meetings.
The meeting attendees agreed that group methodologies are now a focal point for client-friendly innovation.  The team that organized the meeting, led by Anton Simanowitz and Lisa Kuhn and sponsored by Asad Mahmood of Deutsche Bank, will have much more to say about groups.
Tomorrow, guest blogger Steven Werlin of Fonkoze  will pick up from Anne Hastings, explaining what Fonkoze is trying to achieve through groups.  
Image credit: Tango Desktop Project
Have you read?
Indian MFIs and the Smart Campaign Collaborate to Release Tool: ‘Client Protection in the Group Lending Process – India’
Measure? Alleviate? No, Eliminate Poverty
Growing Responsible Financial Inclusion

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