Just read an article in The Economist on the new ventures of microfinance, now aimed at assisting poor students in emerging economies. India, China and certain countries in Latin America are already on board.
I think the idea is quite interesting and perhaps noble with the underlying purpose of helping deserving students in desperate need of financing, though the primary challenge seemes to be accountability or the fear of default.
The predominant method of ensuring timely payback in tradiationl microfinance ventures stems from the peer-pressure strategies evident in microfinance self help groups. However, in the case of students from rural regions, the article raises the concern of how such peer pressure strategies would be ineffective, in the case of students that have virtually nothing to lose by not paying back their loans.
Certain strategies adopted by these microfinance firms (Vittana in India and Xacback in China) to circumvent the problems of accountabality involve, loaning to children of existing microfinance clients and limiting loans to second year or final year students who have some record of attendance.
Again the sustainability and longevity of this venture largely depends on the effective implementation of enforceable contracts.
It's worth looking at the long run success rate of these microfinance for students program.
See full article @ http://www.economist.com/node/16996791?story_id=16996791&fsrc=rss
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