III.4- Microfinance schism
According to the 1997 World Microcredit Summit, the poorest
are those who belong to the lower half of the group of people who live beneath
the 1$ a day per capita poverty threshold. The best manner to help the poor
accessing financial services causes debates between Welfarists and
Institutionalists. Although they share the objective of poverty alleviation,
these two approaches place the microfinance at crossroads (Table 3). The former
emphasizes impact on the borrower as the core mission of MFIs whereas the
latter aims at integrating microfinance in the financial markets
(Cornée, 2007). The "schism of microfinance» (Morduch, 1998) stands
as a trade-off between targeting the poor and ensuring the profitability of
MFIs.
III.4.1- The welfarists' approach
Using the denomination coined by Woller et al. (1999),
welfarists are identified as a school of measurement of the poverty, according
to which, "an individual is regarded as poor when he (or she) is beneath a
given threshold to be well off in terms of economic standards.
34
Analysis of microfinances' performance and
development of informal institutions in Cameroon
By Djamaman Brice Gaétan
This school aims at the very poor who are generally riskier
and less accessible (rural population, people living in remote areas). It is
primarily made up of NGOS or co-operatives, which regard microfinance as a
major tool for reducing the poverty of poorest (Hamed, 2004). As it promotes a
strategy for improvement of the wellbeing of the poor populations (Mayoux,
1998), it seeks to measure the impact of micro credit on the living conditions
of the targeted populations, i.e. the change in terms of wellbeing and quality
of life of the recipients. Welfarists concentrate on the level of poverty of
the customers and emphasize the fast improvement of their living conditions,
even with a broad recourse to subsidies. Although they insist on rational
resources management and do not abstain from having a profitable activity, they
do not without the need and the advantages that subsidies bring to MFIs, even
on the long run (Olszyna-Marzys, 2006).
This approach, which is depends on subsidies, has generated
refunding rates below 50% as well as very high operation costs leading to the
failure and the disappearance of some MFIs: Such was the case for the NGO
Corposol in Colombia, Caisses Populaires in South central Cameroon, Projet de
Promotion du Petit Crédit Rural (PPPCR) in Burkina Faso and
Crédit Mutuel in Guinea (Woolcock, 1999; Labie, 2002). MFIs face the
issue of sustainability, the lack of which blocks their development and their
capacity to contribute to the wellbeing of the people that they support. Thus,
the welfarists? approach has been subject to many criticisms as regards costs
and methodological problems (De Briey, 2005). A revival of financial thought
took place in order to study the conditions of successful MFIs. The concern
expressed by economists and experts for the effectiveness of MFIs in the
struggle against poverty led to apprehend effectiveness more and more in
financial and accounting terms.
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