The loss of income due to sickness and incapacitation of a borrower or a family member, and the high cost of health treatment are detrimental to individuals and families in the developing world. Therefore, it is not surprising that illness and death of family members are among the most common reasons why microfinance participants remain mired in poverty, default on their loans and/or drop out of a microfinance program. According to a survey of Zakoura Microcredit Program, problems beyond clients’ immediate control, which were most frequently an illness or a death in the family, were the principal cause of client drop out in 28.6 percent of cases in one sample.10 In a study of long-term clients of the Grameen Bank by Helen Todd, ill health was the key factor differentiating those families that had emerged from poverty and those who had not.
She writes: “[A] serious illness in the family…almost always forced them to liquidate assets in order to pay for medical treatment and/or keep the family afloat… The disaster of illness struck ten of the 17 Grameen Bank families who are still in the poverty group, or 50 percent. Among the families who are no longer poor…only 18 percent...[had] been hit with a serious illness.11 While the figures above are alarming, they are not surprising. Illness and injury are common drivers of bankruptcy in the developed world as well. According to a 2005 study conducted jointly by Harvard Medical School and Harvard Law School, approximately half of all individuals declaring bankruptcy in the United States cite illness and medical bills as the primary factors leading to bankruptcy.12 The major difference between these two groups (borrowers in developed countries and microfinance borrowers) is one of vulnerability. For an individual in a developed country, bankruptcy can be an enormous life challenge leading to significant lifestyle changes. But developed countries have safety nets and established legal and social infrastructures such as bankruptcy laws, as well as other public and private institutions that help people to get re-established and get back onto their feet. In developing countries, these types of infrastructures and programs either do not exist or are limited in their reach. Therefore, for a microfinance borrower living on one to two dollars a day, illness can lead to hunger, deprivation, or even death.
Microfinance: A Platform for Social Change by Marge Magner March 2007 Grameen Foundation
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Grameen Foundation
(Visit Grameen's Website)
Grameen Foundation's mission is to empower
the world's poorest people to lift
themselves out of poverty with dignity
through access to financial services and
to information.
With tiny loans, financial services and
technology, we help the poor, mostly
women, start self-sustaining businesses to
escape poverty. Founded in 1997 by a group
of friends who were inspired by the work
of Grameen Bank in Bangladesh, our global
network of microfinance partners reaches
over 3.6 million families in 25 countries.
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