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How to lend like mad and make a profit: A micro-credit paradigm versus the start-up fund in South Africa

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  • Jens Reinke

Abstract

In current debates about micro-credit, joint-liability schemes are often viewed as the only viable way to non-collateralised lending, and are thus seen as almost synonymous with micro-credit. This article reports about an alternative, non-participatory approach to micro-credit. Prompted by the apparent inability of group credit schemes to reign in lending costs, the article sets out the institutional requirements for cheap, 'mass-produced' credit. It argues that such credit can be viable if mechanisms are in place enforcing the self-selection of potential borrowers and self-motivation of existing borrowers. The analysis of a 'mass-minimalist' micro-credit institution from South Africa supports the argument.

Suggested Citation

  • Jens Reinke, 1998. "How to lend like mad and make a profit: A micro-credit paradigm versus the start-up fund in South Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 34(3), pages 44-61.
    • Handle: RePEc:taf:jdevst:v:34:y:1998:i:3:p:44-61
    DOI: 10.1080/00220389808422520
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    References listed on IDEAS

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    1. Hossain, Mahabub, 1988. "Credit for alleviation of rural poverty: the Grameen Bank in Bangladesh," Research reports 65, International Food Policy Research Institute (IFPRI).
    2. Braverman, Avishay & Guasch, J. Luis, 1989. "Rural credit in developing countries," Policy Research Working Paper Series 219, The World Bank.
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    Cited by:

    1. Marek HUDON & Tchakodo OURO‐KOURA, 2008. "Etude Des Facteurs Contingents Du Taux De Remboursement Au Sein D'Une Institution De, Microfinance: Le Cas Du Togo," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 79(2), pages 301-322, June.
    2. J. Lara‐Rubio & A. Blanco‐Oliver & R. Pino‐Mejías, 2017. "Promoting Entrepreneurship at the Base of the Social Pyramid via Pricing Systems: A case Study," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 24(1), pages 12-28, January.
    3. Carlos Serrano-Cinca & Begoña Gutiérrez-Nieto & Nydia M. Reyes, 2013. "A Social Approach to Microfinance Credit Scoring," Working Papers CEB 13-013, ULB -- Universite Libre de Bruxelles.
    4. Mohamed, Toka S. & Elgammal, Mohammed M., 2023. "Credit risk in Islamic microfinance institutions: The role of women, groups, and rural borrowers," Emerging Markets Review, Elsevier, vol. 54(C).
    5. Richa Agarwal & Ashok Kumar Pokhriyal, 2022. "The moderating effect of attitude to risk on the role of microfinance in entrepreneurship development in Uttarakhand region, India," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 12(1), pages 107-117, December.
    6. Ibtissem Baklouti, 2013. "Determinants of Microcredit Repayment: The Case of Tunisian Microfinance Bank," African Development Review, African Development Bank, vol. 25(3), pages 370-382, September.
    7. Jorge Mota & António Carrizo Moreira & Cristóvão Brandão, 2018. "Determinants of microcredit repayment in Portugal: analysis of borrowers, loans and business projects," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 17(3), pages 141-171, November.
    8. Dorfleitner, G. & Just-Marx, S. & Priberny, C., 2017. "What drives the repayment of agricultural micro loans? Evidence from Nicaragua," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 89-100.
    9. Mark Schreiner, 2001. "A Scoring Model of the Risk of Costly Arrears at a Microfinance Lender in Bolivia," Development and Comp Systems 0109005, University Library of Munich, Germany.
    10. Maria Patricia Durango‐Gutiérrez & Juan Lara‐Rubio & Andrés Navarro‐Galera, 2023. "Analysis of default risk in microfinance institutions under the Basel III framework," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1261-1278, April.
    11. Rayo Cantón, Salvador & Lara Rubio, Juan & Camino Blasco, David, 2010. "A Credit Scoring Model For Institutions Of Microfinance Under The Basel Ii Normative," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 15(28), pages 89-124.

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