Client Must Come First– it is the title of the article that shook my “rational” thought. In particular, i am talking about zero tolerance default policy. The simplistic economics makes sense- zero tolerance creates the incentve for the individual and the group to not default (i.e. comittment and enforcement). But how about the resulting free rider problem? Or, how about the cases that some people will punish group members so severly for defaulting that loan groups no longer serve as a support system but instead serve as a threat (sometimes even a threat of death)?
And, at the end of the day, what is more important–high loan repayment rates or helping the people we are set out to help? These questions may seem interliked because they are. But, as to which side of the fence to lean on, I am starting to lean on the help the people we are setting out to help. Perhaps, if La Ceiba expands into a larger MFI we may need to re-evaulate our policies. But until then, the question is, what are the best policies for the people of Siete de Abril?