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Inhibitors to Success: Health

Written by: Grameen Foundation

Article Overview: 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.

Inhibitors to Success: Health

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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Article Tags: death in the family, declaring bankruptcy, developed countries, developed country, developing world, grameen bank, harvard law school, harvard medical school, health treatment, helen todd, ill health, incapacitation, life challenge, lifestyle changes, medical bills, microcredit program, microfinance program, principal cause, safety nets, term clients



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