Why the poor do not participate in microcredit programs

Self-exclusion

The poorest, especially the poorest women, often lack confidence, skills, and market contacts. They deem themselves unable to repay debt. This may be particularly relevant for women, who may have limited control over the revenues used for repayment.

Shortage of time

Borrowers must incur the opportunity cost of weekly meetings and other program demands on time. These activities, however valuable, take time away from important domestic tasks as well as other remunerative activities. Some of the poorest people, such as destitute single mothers with sick children, as well as mothers with young children, may not participate because they cannot afford the time demands of weekly meetings.

 peer group exclusion

Peer groups (as well as staff) may have a tendency to exclude those most likely to experience repayment difficulties. While donors tend to view the poor as homogeneous, during the process of self-selection, group members will filter out those who represent the greatest risk for the group (Montgomery 1996, Hulme and Mosley, 1996; Noponen, 1990) and may also include wealthier individuals for social reasons. (Hassan 1997).

High loan floors 

As little as $50 can be too much for many first-time borrowers. Yet microcredit programs often have official or unofficial minimum loan sizes (R.I. Rahman, 1997). Some caution the propensity to impose minimum loan amounts may raise with increased emphasis on financial performance. A stronger emphasis on financial viability could lead to greater pressure to give larger loans, as opposed to smaller loans where administrative costs are proportionally much higher.