While the placement of microcredits in a group expresses the essence of microfinance by its attention to the base of the pyramid, it may be the placement mechanism that is most exposed to operational as well as reputational risk.
In the experience of MicroRate, the operational risk in group methodology is furthered when the regulation of the group's operations is imprecise. There is a high level of manipulation of cash, a relaxation of credit policies and, in general, insufficient control.
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