Can Cashless Microfinance Increase Development?

I came across an interesting article in the NY Times International Blogs about how cashless microfinance is helping to open more doors for women in West Bengal. 

A few brief extracts from the article:
The hard-core poor, or people who live far below the national poverty line, are vulnerable to even small changes in circumstance, from a shift in daily wages to the onset of heavy rains. Repaying a microloan can become an untenable proposition.

Bandhan’s program is not for profit and offers cash-free grants to selected participants in poor villages for 24 months. A “grant” refers to everything a borrower may need to start and ply a sustainable trade — everything, that is, but cash.

The hard-core poor have no liquid assets, which they require to pull themselves out of poverty. But putting mere cash in the hands of people whose immediate concerns are regular meals and safe shelter is risky for them and for their lenders.

This is why the bridge programs inspired by BRAC are so important. They offer the poor opportunity but without the initial risk of debt. But they also demand commitment and require change in the habits
that may hurt the potential gains from microloans.
The article highlights the importance of having a holistic approach to debt financing as merely providing loans to vulnerable people may not improve their situation. After several decades of experience with microfinance, there are now lessons that we can draw upon and build better programmes to help less-developed communities to grow and improve their living conditions.

What are the pros and cons of microfinance?
What are some of the risks that should be factored in when considering a programme?
How should frameworks be designed to engage communities and improve the chances of success?

These are just some of the questions that will be dicussed in our upcoming microfinance programmes in 2013. If you are involved in microfinance projects or considering microfinance as a potential solution, we have a microfinance course coming up in March 2013: Microfinance - with a focus on African Countries. If you require a course sooner or if you are interested in a microfinance with a focus on countries in other parts of the world, please feel free to contact me to discuss the possibilities: andrea@alexanderbrookes.com, +44 7778 219 688 or +44 207 147 9989.

I recently read Microfinance for Bankers and Investors: Understanding the Opportunities and Challenges of the Market at the Bottom of the Pyramid, which provides a reasonable overview of the microfinance sector. If you would like other book recommendations, please feel free to email me babajooalbert@gmail.com.