The Grameen case is inspiring because the first beneficiaries of the project were landless. Land beneficiaries in South Africa could benefit more from the Grameen lesson. The bank used the group-lending strategy to get loans to the poor people. “Social capital” was created using “peer-pressure” and this annulled the need for physical collateral that poor people do not have. The bank utilises what it calls ‘solidarity groups’(formed by the villagers using their local selection criteria), comprising of informal groups that apply for loans together while, simultaneously, its members act as co-guarantors of repayment and support each other to further their economic advancement.
The bank (Grameen) had also helped to bring more women into business, create thousands of new enterprises and introduce the financially illiterate to the banking system. While microfinance has long been used as a tool against poverty in areas like India, Bangladesh and other Asian countries, it however remains a largely untapped sector in Africa.
Advantages and Disadvantages of Group-Lending
The group-lending methodology popularly known as the Grameen model has got its advantages and disadvantages. However, replication of the model has proved successful in a number of countries. It is also prudent as regards “copying and pasting” models from other countries. What is important is to “copy-paste and modify” so as to acclimatize the models to local conditions. Social structures differ from one country to the next, so models that work elsewhere may not work in other settings. This could be due to different social, cultural, political and economic conditions.
Although a multiplicity of challenges face group lending, it is important to develop services that are both responsive to the clients’ needs and are financially sustainable.