Three major types of microfinance systems characterize the Western African sub-region: credit unions (“Systèmes Mutualistes”); solidarity group systems (based on the replication of the Grameen model, where what we call a Self Help Group or SHG is financed after identifying certain activities which can generate a profit), and; village-bank type systems (“Réseaux de Caisses Villageoises”)

1. Measurement of economic and social impact of short term loans in Sub Saharan countries
By Stephane Soami
Sub-Saharan Africa is the one region of the world where the number of people living in absolute
poverty continues to grow. From 1981 to 2001 in this region, the number people living with less than
$1 a day rose from 42% to 47%1
while absolute poverty dropped from 40% to 21% in the world as a
whole.2
As an attempt to alleviate poverty in the region, many countries have developed some
microcredit structures to help finance projects (in agriculture, trading, crafts, or processing
industries rather than consumption) at a smaller scale in communities.
The microcredit operation in these countries is directly conducted through a specialized financial
institution also called the Microfinance Institutes (MFIs). It operates as a commercial bank with the
exception that the lending and the borrowing are conducted with the sole objective of facilitating
access to credit to the poor who cannot obtain a loan from a conventional financial institute or a
bank because of their inability to provide a collateral.3
We will investigate the social and economic impact of microfinance loans in the West African region
through the evidence of microfinance in Africa and its perception, then how is measured the social
and economic impact of short terms loans.
Evidence of Microfinance in Africa and perceptions
Three major types of microfinance systems characterize the Western African sub-region: Credit
Unions (“Systèmes Mutualistes”); solidarity group systems (based on the replication of the Grameen
model4
, where what we call a Self Help Group or SHG is financed after identifying certain activities
which can generate a profit), and; village-bank type systems (“Réseaux de Caisses Villageoises”).5
The credit unions have been operating since the1960s but its expansion was only visible from the
1980s after most of the rural development banks started collapsing in the sub-region. Normally,
those systems have proved to be efficient with respect to their saving mobilization strategies and
the high level of repayments.6
However, some of the policies applied by those systems have been
criticized in recent years (i.e. some low-income groups have been marginalized because of their lack
of initial savings).
Besides, these systems are facing government issues and other administrative inefficiencies which
result in too much centralization of decision-making.
1
Wali, I., 2009. Poverty Alleviation & Microcredit In Sub-Saharan Africa. International Business and Economics
Research Journal. 8(1), pp. 1-2.
2
Ibid.
3
Ibid.
4
Shereif, S.R. and Sharief, S.M., 2005. Scaling up Microfinance in Eastern and Western Africa with Lessons from
India. Africa Economic Analysis. Magnus School of Business. Chennai.
http://www.africaeconomicanalysis.org/articles/pdf/microfinance.pdf
5
Ibid.
6
Ibid.

2. Microfinance in the form of a “solidarity group” system is the second type of Microfinance which
provides small, non-targeted credit with repayments through weekly instalments during meetings
with the group members. Simplified loan applications have resulted in reduced transaction costs.
The third type of Microfinance is a “village-bank”-type institutions which combine certain
characteristics of both previous models.7
The village banking approach relies on the social cohesion
and community solidarity at the village level. This local financial institute is usually managed by their
people themselves according to a set of rules they have established. Village banking systems have
been successful in reaching the poorest, and have often been developed in remote and challenging
rural areas. Microfinance Institutions (MFIs) have increasingly become a tool to provide financial
services to SMEs that focus on poverty reduction and the improvement of the social and economic
welfare of the poorest.
There is an increasing literature on how to improve financial service delivery to the poor, hence it is
important to understand to what extent these credit interventions impact the beneficiaries. It is just
fair to apply a qualitative and quantitative approach in measuring the benefits of the short term
micro-finance loans at this stage.
Measuring the benefits of short term microfinance loans: a quantitative and qualitative approach
The first part of the assessment will focus on qualitative indicators, which measure social variables
that are vital human development indices and also represent real improvement in the quality of life
of the poorest.
My opinion is that the benefits of micro-finance loans can be measured in terms of before/ after
analysis. From an economic domain , the before/after analysis will give a practical valuation of
(business opportunity, market opportunity, quality of business premises, household assets), access
to facilities (housing condition, health condition, food and nutrition, children's education), social
domain (family relations, time pressure, participation in social activities, public respect and
acceptance) or a spiritual domain (participation in church activities, church attendance, prayer and
devotion, and giving).
Now switching our attention to quantitative variables, we will focus mainly on changes in four
important indicators: business turnover, monetary value of enterprise inputs or raw materials,
monetary value of machinery, and employment. Here gross monthly business turnover would
represent the turnover or monthly sales. The turnover is used as a proxy for income and profit since
most informal enterprise owners do not separate the two variables. By assuming here that gross
sales or cash flow from the business could be used to project the business growth at least in
monetary terms, we can understand how in injection of capital into the business can have an impact
on the four indicators.
7
Ibid.