Community-Managed Loan Funds: Which Ones Work?
May 2006, Murray, J. & Rosenberg, R.
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How viable are community-managed loan funds?

This focus note explores the increasing reliance of microfinance projects on community-managed loan funds (CMLFs). The note:

• Presents conclusions from a performance review of CMLF projects supported by donors and international non government organizations (NGOs) over 15 years;
  
• Argues that success is strongly linked to:
  
  • The source of funding for the loan group members;
    
  • The quality of external support community groups receive.
    
• Describes the study methodology, including sources and criteria for evaluating CMLFs;
  
• Reviews the performance of three types of CMLFs, namely:
  
  • Donor-supported CMLFs;
    
  • Savings-based groups;
    
  • Self-help groups (SHGs).
    
• Discusses both the advantages and the drawbacks of CMLFs;
  
• Addresses CMLFs' need for long-term external support;
  
• Reviews the debate over the relative merits of community managed and professionally managed approaches.

The note concludes that:

• Externally funded CMLFs almost never work;
  
• Savings-based CMLFs, that use no external capital, perform surprisingly well;
  
• SHGs, most of which have bank linkages, have shown mixed performances;
  
• CMLF projects need to do a better job of reporting performance;
  
• Instead of injecting loan capital into CMLFs, funders should use their resources to provide support services for the groups.

19 Aug 2010

AJI KUMAR KSUDP India

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Journal Volume/Pages:
16

Publisher(s):
CGAP

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