Daniel is the manager of DUMFI, a very successful microfinance institution. However, he is feeling depressed as he reads a news item “Village woman driven to suicide by microfinance”. How could this be?
Over the coming days, Daniel is forced to consider a number of difficult questions: are their interest rates too high; is their insistence that loans must be used for income-generation a mistake; are their rules on savings and joint liability for loan defaults hurting poorer women; do they pay their staff too much?
These problems have all been experienced by microfinance providers that otherwise are considered to be extremely successful. They are not “made up” and many more such problems are emerging everywhere as microfinance expands and matures. Sometimes these result from mischance and circumstances that are difficult for management to control; other times they are the result of bad practice.
This lesson highlights a number of issues that are vitally important for institutional sustainability and yet, if not managed sensitively, can lead to hardship and problems for clients. Balancing social and financial performance is one of the hardest aspects of microfinance management.