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MICROFINANCE AND SOCIAL TIES
by
Renée CHAO BÉROFF
Director of research,
Centre international de développement et de recherche (CIDR)
June 13th, 2002
Report by Élisabeth Bourguinat
Translation by Rachel Marlin
Overview
For the past twenty years in developing countries, microfinance
institutions have offered those who have been excluded from the
traditional banking system, the opportunity to save or to borrow very
modest sums of money and thereby to get started on the road
towards economic development. Since social ties are often the
principal source of wealth for the very poor, these institutions try to
reinforce these links, in particular by creating solidarity groups
which help to secure their loans. However, there is a price to pay for
the development of social ties and their cost is not accounted for in
traditional indicators of financial performance. Caught between the
need to generate revenues in order to become independent of
international public aid which is becoming increasingly scarce, and
the desire not to betray their initial objective, namely the fight
against poverty, microfinance has to make a choice between these
two goals.
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