Microfinance and social ties

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Director of research, Centre international de développement et de recherche (CIDR)

Seminar Social life | Thursday June 13, 2002

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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This session was published in issue n°39 of the Journal de l'École de Paris du management, entitled Le profit n'est pas tout.

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