In Bangladesh, GB clients are essentially illiterates and have to first memorise the fundamental basic principles of hygiene and family planning to qualify for microcredit. In essence, the GB’s program operation is more like a social movement (Taub 1997). Both illiterates and literates, poor and slightly well off in Nigeria, can come together to form ROSCAs, and membership in many rural areas of the country is in the range of 50–95% (Bouman 1995). Analysts and microfinance professionals have highlighted the profile difference between the two groups of microfinance clientele in two countries thus: ‘though there is no shortage of well-educated and charismatic professionals in Nigeria, the skills and vision to lead a breakthrough microfinance organisation to the next level must be cultivated’
(Alter et al. 2002, p. 24). Obviously the profiles of the Nigerian microfinance clients and those of the Bangladesh programs are vastly different in terms of training, education, and exposure to life. These differences in the clients’ profiles could also pose a significant problem in terms of the loan repayment performance. This was the case in the agricultural small farmer subsidised credit schemes of the 1950s–1980s discussed in section 2.2. Studies conducted at different timeframes in respect of the subsidised microcredit programs post-1980 also report that though the levels of the repayments were high, the default rates had started to climb with people who had education, income, wealth, social status, and program experience (Yaqub 1995; Chowdhury 1992). As stated earlier in the last paragraph of section 2.4.3.5, both Yaqub (1995) and Chowdhury (1992) studies have found that the repayment of government intervention loan schemes in Bangladesh showed a decreasing trend with people who had rising income or wealth as well as education, experience, and social status. This has been found to hold true in the Nepalese Agricultural Development Bank as well as in India in relation to gaining status with the new-found wealth resulting from microfinance programs that are meant for the poor (Gupta 1987). Perhaps this offers one possible reason why the ASA technical officers contracted by the UNDP to investigate the feasibility of establishing their own type of program in Nigeria, under the auspices of the MicroStart Nigeria Programme, demand some form of collateral assets from their Nigerian clients. This is a clear indication of client profile differences (in terms of status symbols such as education, training, income, wealth, life exposure, program experience) in the two countries (Nigeria and
Bangladesh) respectively. The outcomes of the MicroStart Nigeria Programme mid-term evaluation report seem to suggest that it is feasible to operate a microfinance business in the country, or at least in some parts of the country (Alter at al. 2002).
In the light of the foregoing discussions on the similarities (section 2.6.1) and dissimilarities (section 2.6.2) of the cultural and contextual influencing factors between Bangladesh and Nigeria, it is still important to highlight a number of traits that uniquely distinguish them (GB and ROSCA) in the two countries (Nigeria and Bangladesh) and the climate of the country under which they conduct operations. Yet the unique features of these two institutions (GB and ROSCA) characterise their operations summarised in Table 2.6 below, and the differences between them and the country under which they operate constitute a gap in the existing knowledge. Thus the exploitation of the differences between the two institutions (the Bangladeshi GB and Nigerian ROSCAs) to suit Nigerian conditions is all that this study is about.
Table 2.6 Some key dissimilarities in the operational mechanisms of GB and ROSCA microfinance institutions
Unique features of the two systems: GB and ROSCA
GB microfinance institution unique traits ROSCA microfinance institution unique traits Substitution of joint liability or social collateral
for physical collateral
Pooling of “savings first” before loans or credits could begin to be offered on a reciprocal basis Provision of “credits first” before savings
deposits are demanded
Right of access to common pooled savings pot or contributions is transferable to non-members
Business operations conducted on the basis of subsidised credits from external sources
Pooling of large funds to meet the demand of group members
Loans or credits are provided only to group members
Loans or credits offered to individual members Groups held responsible for group loan
repayment
Individual held responsible for repayment of common pooled savings or contributions, and collateral demanded in some cases
2.7 Summary
Based on the discussions conducted in the chapter, it is now becoming increasingly clearer that the MFIs that can deliver greater dividends (in terms of jobs creation, income growth, and poverty reduction) to its clients are those that can adhere to the microfinance best practices. Advocates of the new approach argue that the provision of subsidized rural finance may not always be the most effective route to achieve the welfare of the poor. They strongly argue that
it is only when the MFIs strive to eschew subsidies, have credible accounting system in place to recover bad loans, and make of use information management systems to monitor and identify best practices that the MFIs can attain financial sustainability (Morduch 2000; Yaron and Benjamin 2002). These practices could also be complemented by government-oriented policies, such as increased investment in rural infrastructure, and in human development (Yaron and Benjamin 2002; Zeller and Sharma 2002b). These measures have had tremendous leverages on various institutional forms and varieties of the microfinance programs that have been established since the 1990s. This paradigmatical debate too has implications for the choice of the funding program that will be developed in the study. Thus the knowledge gained in studying the differences between the GB’s original program in Bangladesh and its variations or new generations elsewhere considered better practices, formed the foundations (or theoretical frameworks) of this study. These theoretical foundations or framework concept will be developed in the next chapter that follows.
Chapter Three
Theoretical and Conceptual Framework
3.1 Introduction
This chapter embodies the conceptual framework and a preliminary model of microfinance (GB-ROSCA hybrid model) that will be developed in the study that if applied to the deficient funding scheme of the SSE program, will create more employment opportunities than the current conventional approach in Nigeria. The final financing model will be determined in Chapter Five after the acquired questionnaire data has been analysed and results obtained. Thus the preliminary model provides a framework that guides the research. The theories and concepts that form the foundations of the microfinancing model investigated to replace the SSE program deficient financing will be discussed in the chapter along with their relationship with and influence on the GB-ROSCA hybrid microfinance model developed in the study. The two most dominating concepts in the debate for the provision of microcredit to the economically disadvantaged active poor are outreach and financial sustainability discussed in detail in section 2.4 of Chapter Two. These two concepts constitute the key inputs for the microfinance model that will be developed in the study to surge employment opportunities in Nigeria. The provision of microfinance access to a vast majority of the Nigerian unemployed graduates in terms of outreach is one of the key elements that can reduce unemployment and promote development, and in the process will generate income that facilitates access to the basic human needs of a material nature such as food, shelter, clothing, and more significantly, education and training that are prerequisites for human development. The lack of these basic needs or necessities of life means poverty. The World Bank in its 2000/2001 Development Report states that poor people not only lack employment opportunity, income, adequate food, shelter, education and health, but also are often exposed to ill treatment by the state, and are powerless to influence the decisions that affect their lives. The report further states: these basic human needs constrain their ability to start a business, acquire assets, and insure themselves against illnesses and financial losses.
3.2 Three distinct strategic pathways to access microfinance services for household