Journal of Microfinance / ESR Review


The primary question examined in this study is whether client loans grow or stagnate over time. Loan growth is important to financial sustainability and is also a proxy for positive impact. The relationship between loan growth and a variety of factors--program loan and savings policies, site selection, membership dynamics--are explored in the context of seven village bank programs. The study concludes that on average, loan size did not stagnant but increased steadily, although at a rate lower than the original village bank model projections. Only programs that allowed non-poverty level loans (loans above US$300) approached the original loan growth rate. Other factors positively associated with more rapid loan growth were urban site selection and restricted internal fund policies. Membership turnover --influx of new clients and drop-out of original clients--was also evident across all programs, dampening loan growth rates by approximately 25%. While factors external to the program affect these dynamics, program policies can play an important role in stemming the drop-out rate. In early loan cycles, initial program promotion and orientations need to clearly articulate program requirements and terms. In later loan cycles, policies pertaining to savings access, meeting frequency, and membership requirements may require flexing to enhance clients' incentives to remain.



Journal Title

Journal of Microfinance

Issue and Volume