Learning from Failures in Microfinance

What Unsuccessful Cases Tell Us About How Group-Based Programs Work



ABSTRACT Five cases of failure within group-based microfinance programs are presented. I argue that group performance turns not only on the program's lending policies and cost structures–important as these are–but on the nature and extent of social relations (a) among potential and actual group members, (b) between group members and program staff, and (c) among program staff. Failures teach us important lessons regarding how (as opposed to why) these programs work in happier times. Those seeking to replicate microfinance programs, especially at the rate envisioned by the Microcredit Summit, need to pay serious attention to these institutional junctures.