Managing Microfinance
Managing Microfinance
Introduction
For the most part, economists cite contract design to explain microfinance successes. Group lending is especially celebrated, followed by the dynamic incentives described in chapter 5. International donors tend to focus on financial choices instead, celebrating lenders that minimize subsidies and set interest rates at levels that promote saving and wise investment (as described in chapter 9). Both good contract design and pricing policy matter greatly. Still, they are necessary conditions for success, not sufficient conditions. A great deal of what distinguishes failed microfinance from successful microfinance ultimately has to do with management: Particularly with how staff members are motivated and equipped to do their jobs.’ In this, microfinance is no different from businesses that sell soft drinks or haircuts.
If one just read newspaper stories, it would seem that all microlenders can boast repayment rates above 98 percent and are......
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