Costs and Benefits of Credit with Education: The Case of PADME in Benin

This paper documents costs and benefits associated with PADME’s delivery of health-related services developed as part of the Microfinance and Health Protection (MAHP) initiative from 2006 through 2009.

The paper presents revenues and expenses realized by PADME in offering Credit with Education with a focus on health in three branches located in Bénin. Findings include:

• Program incurred a net financial cost in all three years of the pilot, and is poised to continue costing the MFI over USD 70,000 annually in the coming years;
• If PADME were to increase its effective interest rate on the program along with certain other efficiencies, the program could achieve break-even and begin earning net income in 2011.

The study compares PADME’s Credit with Education loans to its regular group loans. It examines average loan sizes across a randomized sample that received Credit with Education with and without the education component. Although anecdotal evidence suggests that Credit with Education clients perform better than regular group-loan clients and that clients who receive education take out larger loans on average, these findings are inconclusive and need to be further researched.