Tortilla baker Linda Flores has a better life in Nicaragua thanks to microfinance, but her children are still not going to school. Moroccan beekeeper Abdelkebir Baddi has a loan as part of a group, but what if one of his fellow beekeepers can't keep up the payments?
 
Klaas Molenaar is president of the European Microfinance Network - he casts his critical eye over eight video portraits made by Radio Netherlands Worldwide about microfinance and the people who receive it.

Microfinance has opened new avenues for millions of excluded people, giving them the chance to participate actively in society. Microfinance Institutions (MFIs) have made remarkable progress in just a few decades, but huge challenges remain and the world of microfinance has to ask itself difficult questions if things are to improve from here.
 
Future
After 20 years concentrating on their evolution, growth and sustainability, the time has come for the MFIs to start listening to users again. These people can show us the real dilemmas that need to be faced and, if we listen, perhaps we can build a more effective microfinance sector.
 
For example, the tortilla baker Linda Flores and her family in Nicaragua are undoubtedly better off; their living conditions have improved. But the children are not going to school anymore, instead they are helping in the family business. The long-term plan is to expand the business so the kids can go to school later and study for a better life, but the short-term reality is that they are currently working and not in the classroom.
 
There are also other demands placed on the family. After getting up at half-past-four in the morning to bake the tortillas, Linda Flores is still expected by their MFI to join in-group training on health and social issues.
 
This may be necessary and helpful, but is it fair to make it a condition for a microloan? Would the same be asked of a regular small or medium-sized enterprise?
 
Beekeepers
And what about the issues involved in offering microloans to groups of like-minded people? Being active in a group often helps people overcome barriers and seek financial help - this has been the case in many microfinance programmes.
 
But how far can we go in demanding that people operate as part of a group? It is true that the group can help stimulate people to save and invest and that there is often an atmosphere of trust.
 
Nonetheless, is a group really an effective instrument to channel microloans? It can also become a burden, as the beekeeper in Morocco tells us. How much time do people have for the group and should they all have to wait to get a new loan if just one member hasn't repaid his or her share?
 
Target group
One of the key characteristics and the basis for the success stories of microfinance programmes claimed by the MFIs is the direct relationship that their staff has with the clients.
 
But is that still the case for the people working at the central offices? The ones who talk nicely about the achievement of their organisations? The lady working for the MFI in Morocco mentioned more than 430,000 clients in the video-portrait of the beekeeper. Does she really understand the reality of all of these clients?
 
Cost-conscious
It seems a good thing that MFIs are evolving and transforming into formal banks. This will stimulate them to be as efficient and cost-conscious as possible, so that costs per transaction will drop.
 
In turn this could mean larger loans being offered, but it also implies a gradual move away from the target group, the very people portrayed in these videos. Is this really what the MFIs want?
 

Part 2
 
What do you think of Klaas Molenaar's article - is microfinance on the right track or is it in danger of losing its personal touch? Post your comments below for the Discussion section.