Improving Design and Performance of Group Lending: Suggestions from Burkina Faso
The paper states that MFIs are rapidly expanding through West Africa and it is possible for them to achieve depth of outreach at least moderate scale in rural areas, but many challenges lie ahead. It says that meeting the challenges involve both reform and experimentation. Based on a study conducted in November 1996 and February 2000, on a microcredit program in Burkina Faso, the paper draws attention to some aspects of performance, design, and implementation of microcredit projects. It presents the lessons learned from a credit program for women that use group-lending methodologies and highlights six design and implementation issues that should be explored. They include:
- Making mutual guarantee groups smaller and more central to non-repayment penalties;
- Offering more training in better business practices and more variety and experimentation in credit and savings mechanisms;
- Developing instruments to mitigate commodity price risk at the individual and program level;
- Becoming more consistent in the treatment of debts of deceased borrowers, and instituting a nominal insurance charge;
- Documenting, codifying and implementing new standard procedures to be followed in the event of non-repayment;
- Preventing and mitigating the likelihood and effects of staff embezzlement.
Provides lists of major finance institutions in Burkina Faso and say that lessons learned from Asian and Latin American experiences may not be applicable to West Africa.
