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IV. Principle I: Prioritize Group Formation and Networking

Guest post by: United Nations Economic Commission for Africa

Article Overview: Key Principles for an African Model of Microfinance

IV. Principle I: Prioritize Group Formation and Networking

Collective and cooperative support is a critical microfinance strategy at both the local
level, in the form of solidarity groups, and at the national and regional level in the form of
networking groups. Collective organization has several advantages in microfinance initiatives,
the foremost that they pool together human and material resources. In Africa, group organizing
has proven itself an effective strategy for MFI sustainability that Africans are especially
predisposed. Group formation for individual and community goals is a pre-existing,
"homogeneous" mode of organization in Africa that already operates in traditional financial
schemes and is readily adaptable to new microfinance initiatives. The group has proven
especially effective in the rural setting, where 80% of Africa's population reside (Box 1). The
relative isolation, small size, and common resources of villages engenders a mentality and
approach to problems that are seen as mutual rather than individual.

MFIs can utilize and support groups with regular meeting to reinforce group solidarity,
discipline, and consistent repayments. Groups are especially effective for educating and training
microfinance participants, enhancing networking and information dissemination. They are also
an important participatory tool that can reduce administrative cost by giving certain
responsibilities, such as loan monitoring, to the members themselves. Typically, small group size
is more effective to ensure that members genuinely know and trust each other.

Microfinance group members are typically more ready to take ownership for and support
microfinance initiatives. Mutual trust and peer pressure within savings and credit groups ensure
participation and repayment in microcredit programmes. The support and strength of a group
often raises community consciousness and creates a common infrastructure to solve problems
common to all, pooling local knowledge and resources for initiatives, such as bulk purchasing
and transportation, collective bargaining, and common infrastructure development – i.e. water
pumps, health care, and education schemes. Groups empower individuals to support each other
not just financially, but also emotionally. The group impresses upon members that they are not
alone or helpless, but can rely upon the support of their community, and cultivate self-esteem
through contributing to each other. This non-material benefit is an important resource, especially
during individual or collective crisis.

The benefits of organizing are not limited to the local group level, but can scale-up
through networking MFIs. Microfinance networks enhance MFI coordination, monitoring,
advocacy, and outreach. Networks allow MFIs to integrate approaches and better consolidate,
share, and disseminate human and productive resources, including technical, traditional, and
cultural knowledge. Such collaboration widens the group of stakeholders involved in the
microfinance dialogue, and provides a legitimate and accountable vehicle to lobby for State and
international actors to channel assistance. Access to these support structures available in
networking enables MFIs to benefit from economies of scale and scope, providing certain
services at lower institutional costs than otherwise possible. In some case it may be cost effective
for MFIs to outsource part of its operation to partner organizations more capable of efficiently
performing a service (i.e. establishing an information management system).

Microfinance in Africa: Combining the Best
Practices of Traditional and Modern
Microfinance Approaches towards
Poverty Eradication

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Article Tags: africa group, collective organization, common resources, community goals, cooperative support, credit groups, group formation, group size, group solidarity, information dissemination, local knowledge, material resources, mfis, microfinance initiatives, mutual trust, networking groups, peer pressure, regional level, relative isolation, solidarity groups



Related Forum Posts
Re: Make Friends...Literally BUILD them! - I agree! Networking is definitely the key word here. What does everyone feel about the different Networking platforms out there? Twitter Facebook LinkedIn what are some others?
Re: Management Processes? - Great question Aaron. Like you and Kevin have indicated, we can get a lot done by creating a management process. I like to: Prioritize what I need to do in order of importance. Pick the top priority item. Brainstorm possible tasks. Pick a task and complete it. Move on to the next task. I find this helps break things down into manageable pieces. It also helps just to take small actions. [Link removed by forum admin]
BNI Groups - do they work? - Hi Lesley, From the members in my Mastermind Group I've heard a number of positive and negative things about BNI Groups. Just like a Mastermind Group, it all depends on who the people are. If the personalities fit and the members can add value to your business it can be worth checking out. The best bet is to go to a meeting as a guest to get a sense of who is in the group and if it is for you. It doesn't cost you anything except a little extra sleep the morning of. Good luck!
Re: On Which Social Media Sites Are You Most Active? - I must respectfully disagree completely with that premise Evan. When speaking of a "Small Group", we are talking abotu a "Mastermind Group". As we all know, such a group is instrumental to success, online or off. The groups can grow quite large too. My group currently has 35 members, but several are actively participating and sharing content.
Re: How can a social networking site make serious money? - Hi There, It is quite interesting, that some Social Networking do produce an income. I think testimonials are always a benefit to share. See one below: This Social Network has changed my life! Every night is a Friday night and everyday is a Saturday!! Because of it, I have been able to leave the workforce 10 years early.It has given me back my life. Many of us would like to retire early. I am sure there are many more. The point is of focusing with great determination. The ongoing challenge is to stay focussed and not be sidetracked into a newer scheme or so. Also I have read, during this financial turmoil, more people turn to Social Networking for various reasons.


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