Trust-Building Mechanisms in Group-Based Microfinance: A Cameroonian Perspective

Abstract

While trust is critical to microlending groups, much less is known about the vital factors and mechanisms that foster its emergence in microlending groups. This paper examines the practices of trust building and use in microlending groups. The results suggest that trust is produced and developed in microlending groups through a combination of calculative, prediction, intentionality, capability and transference mechanisms. These mechanisms are not mutually exclusive but act together to build trust. Though trust has general characteristics, whether and how it is formed and developed in microlending groups depends on context-specific factors such as informal debt relations. Trust among group members is bolstered by multiplex relations of social events, neighbourhood, and friendship. The paper suggests that the unbanked population has a rich informal credit history.

Keywords:

• trust
• microfinance
• informal debt relations
• contextual factors
• Cameroon

Acknowledgements

Thanks to Prof. Joseph Cannon, Prof. Alistair Anderson, associate editor (Prof. Eugenia Correa) and the two anonymous reviewers for helpful feedback on various drafts. The usual disclaimer applies.

Notes

¹ By informal financial clubs we refer to rotating savings and credit associations (RoSCAs) and accumulating saving and credit associations (ASCAs). RoSCAs are ‘associations in which members regularly contribute to a fund that is given in whole or in part to each contributor in turn’ (Ardener, 2010, p. 11). ASCAs differ from RoSCAs in that the association distributes part of its fund as loans to members, and members get their share of the fund at the end of the cycle.

² An informal financial club is locally referred to as njangi and tontine in Anglophone and Francophone Cameroon respectively.