Managing Loan ‘Delinquency and Microfinance: Lessons from Zambia

This paper describes the issues and problems faced by loan officers. The study draws data from Zambia and focuses on the CETZAM repayment crisis. CETZAM was selected as a model in the research which set out to explore the emerging role of loan officers in MFIs providing credit to the poor. It identified the following problems:

• MFI had to balance donors requirement and expectations with those of the poor;
• Loan officers face hierarchical accountability pressures and offset MFIs expectations against clients;
• Peer payment within groups does not induce good repayment, forcing loan officers to use other informal means;
• Clients groups faced problems due to their inability to enforce the mutual guarantee.

The paper finds that emerging second generation MFIs can draw upon knowledge from past successes elsewhere in the world, but they may encounter different problems on field from what they expected or even planned for. The case provides evidence to support the view that microfinance depends on personal relationships, and that loan officers play a crucial role in building and maintaining these social bonds.