2005 was a critical year for microfinance. The declaration of 2005 as the ‘International Year of Microcredit’ by the United Nations, the endorsements by the G8 at the Gleneagles’ Summit and the Commission for Africa Report (2005), all demonstrated its official support as a means of increasing access to financial services.1 The World Bank and the International Monetary Fund likewise have both embraced it as part of their strategy for alleviating poverty (Microfinance Matters, November, 2005, p. 3). Microfinance is based upon providing small loans, often under $100, to the poor and very poor to enable them to earn additional income by investing in the founding or growth of “micro-businesses”. More broadly, it aims at supplying micro loans, savings, and other financial services to the poor. It operates on the premise that the poor will invest loans in micro enterprises, repaying those loans out of profits, and their businesses will grow, thereby potentially lifting large numbers out of poverty. These expectations are based on the premise that the poor will be ‘empowered’, encouraged to participate and equipped to self-manage their activities.

However, microfinance is not yet widespread because a vast majority, in particular in Africa, cannot access financial services (Beck, Demirguc-Kunt, & Martinez Soledad, 2005; Honohan, 2004; Spencer & Wood, 2005) even though poverty is officially widespread and acute (Paxton & Fruman, 1999; World Bank, 2005). There are also great disparities in the level of development and performance of microfinance. While the developed microfinance institutions (MFIs) of South Asia and Latin America now face the challenge of becoming more commercially viable, emerging MFIs in sub-Saharan Africa face other challenges to their very survival and core methodology (Barr & Fafchamps, 2006; Nissanke, 2002).

Institutional sustainability has lately become a priority. This is arguably a response, in part, to the growing donor ‘fatigue’ with continually subsidizing developmental work. It may also reflect an apparent shift to ‘commercialisation’ from earlier ‘charity’ (Charitonenko & Rahman, 2002; Fernando, 2003, Prahalad, 2005 and Rhyne, 2005). Microfinance institutions are responding by prioritizing repayment rates, creating good loan books, and managing client numbers rather than social intermediation. Repayment performance is a particularly key variable for the donors and international funding agencies on which many MFIs (especially in sub-Saharan Africa) still depend for their funding (Godquin, 2004, p. 1909). These indicators may nevertheless conceal the intervening process by which these much sought after results were achieved.

Disappointing performance characterises MFIs in Southern Africa (Lafourcade, Isern, Mwangi, & Brown, 2005 p. 9). Formal evaluations of microfinance projects throughout Africa suggest that they have often been less successful here than they have in Asia and Latin America (Aryeetey, 1998 and Basu et al., 2004; Pal, 1999 and Porter, 2003). However, these evaluations have hitherto been preoccupied with impact assessment, program replication, client outreach and financial sustainability (Cloke, 2002 and Copestake, 2002). As Mosley and Rock (2004) also note, most evaluations to date derive from the same South Asian context while other regions such as the SSA are relatively underresearched. In addition, there are few case studies of failures (Fisher, 2002). In Zambia, microfinance performance is problematic and MFIs are particularly confronted with the problem of default (Likulunga & Simonda, 2001, p. 4; Musona, 2004), which threatens their own sustainability and further provision of financial services to the poor.

While still relevant to understanding microfinance, and also sought by and/or attractive to donors, evaluation research may also place more emphasis upon its original strategy and later outcomes than its intervening implementation. Research itself particularly neglects the role of field workers or loan officers2 (Ahmad, 2000, Goetz, 2001, Goetz, 1997, O’Reilly, 2006 and O’Reilly, 2004) at the interface with the poor (Holcombe, 1995 and Jackson, 1997), and for attaining institutional sustainability. Loan officers are the key link between microfinance institutions (MFIs) and their poor clients and are at the centre of service delivery (Goetz, 2001 and Isaia, 2005). A number of issues and problems concerned with the work loan officers actually do at this critical interface have arguably not been sufficiently addressed before, but are potentially critical for other frontier territory as Zambia, where microfinance still needs to progress from simply promising beginnings. The focus of this study therefore is on loan officers and how they adapt to different demands of MFIs and their clients, as illustrated by how one key emerging microfinance institution – CETZAM managed its own repayment crisis (or ‘loan delinquency’). The experience of its loan officers is used to draw attention to certain aspects of their roles, tensions and dilemmas in their interactions with clients. It deals with questions such as: What was their role and experience? What strategies did they employ and what were their consequences for clients and MFIs’ sustainability? It will use a case study approach to illuminate what this means for the conduct of key actors – loan officers and their clients – whose work at this interface requires that they specifically account for and otherwise manage it. It aims to provide a distinct, ‘sharp end’, grassroots sensitive perspective upon this particular – and often ill-anticipated – problem within microfinance practice. The case therefore has important implications for the development of microfinance as a viable form of financial intermediation and for other MFIs, particularly those in other emerging areas, which use group lending methodologies.

This paper is organised as follows: the immediate Section 2 briefly reviews the literature about loan officers’ work within microfinance. Section 3 presents the case study methodology, and Section 4 details the local context where the case was situated. Section 5 contains the case itself, and covers its first 6 years of operation, and further findings are given in Section 6. It ends with a discussion and conclusions in Section 7.

2. Fieldworkers in the literature

Field workers are front-line staff in microcredit institutions or non-governmental organisations (NGOs) engaged in direct contact with the clients in service delivery (Ahmad, 2000 and Isaia, 2005). Field workers continually interact with clients (Lipsky, 1980), as the implementers of institutional policies of NGOs. In principle, clients should have a relationship with MFIs, but not necessarily with their management because that relationship is mediated through field workers/loan officers themselves. Microfinance programmes usually rely on practices such as ‘regular’ visits by loan officers and require frequent contact with borrowers and group/centre meetings. The client-loan officer interface is critical to realizing the developmental goals of microfinance. To the extent that they provide this link, loan officers can have considerable impact on an institution’s repayment performance, client outreach, and other group and organisational dynamics.