Joyce established a used clothing and cushion business. Joyce has already received and successfully repaid two loans from SELFINA, and now requires a loan of $1,200 in order to purchase additional stock in bulk. She thanks you for your support.
Joyce is a perfect example of why microfinance works and why the large majority of clients repay their loans. A lot of people who hear about microfinance (or kiva.org) for the first time, ask anxiously, “but how do you make sure people pay it back? Won’t they just take the money?”
The implication is that the clientele who access microfinance (usually the ‘poor’) are less trustworthy, efficient or educated than ‘ordinary’ people. Whether or not this is true is somewhat irrelevant, for a number of reasons.
First, most MFIs have due diligence processes in place to assess client risk, as well as measures such as collateral arrangements and group lending (where a defaulted loan is borne by the group as a whole) to address this risk.
More important than any of these deterrents, however, is an incentive.
The incentive clients have to start a business, build a business, and repay their loan so that they can get another and another and another…The incentive to have ongoing access to financial services from which they had previously been excluded.
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Success!! The loan was 100% repaid