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Lesson 11

Using and promoting groups

Picture of a meeting of the Kalanjiam community banking group

Organising people into groups is a very common strategy for those seeking to provide poor people with microfinance services, but the motives for doing this and the aspirations for the groups can differ widely.

In this lesson you will join Mulenga on a study visit to India and follow his exploration of the role of groups in the provision of microfinance services. You will discover that while some groups are encouraged to be independent and self-sufficient, others are simply a means by which a microfinance institution can deliver its services more effectively to more people.

Diagram of the different levels of the Kalanjiam community banking system

Along with Mulenga and his fellow students, you will be introduced to the Kalanjiam community banking system promoted by the Dhan Foundation in India, to the Village Savings and Loan Associations promoted by CARE in Africa, to the village banks promoted by NGOs in South America, to the Grameen Bank system in Bangladesh and to the Small Farmer Cooperatives in Nepal. These examples will enable you to identify the main characteristics of lending programmes in which MFIs channel loans through groups, and reflect on the limitations of the approaches.

The lesson concludes with a look at the issues involved in moving from group-based to individual lending systems.

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