Sustainability and outreach of a Kachin Church microfinance institution in Burma

Abstract

There is increasing interest in Muhammad Yunus’s Grameen Bank microfinance model as a means of addressing the needs of Burma’s poverty, but there have been no studies of locally led micro-finance institutions (MFIs) in Burma. This study assesses the sustainability and outreach of a church-run microfinance institution in northern Burma bringing to the fore borrowers’ perspectives on impacts by examining the tensions between sustainability and outreach, and the influence of church social capital. The credit union is operationally sustainable but it is not financially sustainable due to poor management, weak organizational structure, inappropriate loan methodology, imperfect information, borrower deception, Kachin cultural values about small income-generating activities, and the broader political and economic environment in Burma. The study finds that the credit union faces a trade-off between sustainability and its outreach to the poor. It attains only 30% repayment rates as most borrowers, particularly the poor often use their loans for consumption rather than generation incomes leaving them entrenched in debt rather than helping them escape from poverty. The role of church social capital in sustainability and outreach is complex as it can facilitate outreach and compromise repayment rates. Yet despite its imperfections, the credit union does help alleviate the poverty of some church members by allowing them to develop human capital and financing micro-enterprises. Church members consider it the best provider of financial services in their locale.