The growth in the Retail sector of Africa

 

非洲投資的前景-關于零售業增長essay（商科類）

 

非洲是一個自己的世界。它是十億居民的家園（約占全球人口的百分之15）和53個國家，占地面積超過3000萬平方公里，每一個國家都有非常不同的氣候和環境。有數百個民族和文化約2000個口語形成鮮明的對比，在政治穩定和經濟發展穩步時期。它是一個有著重要自然資源支持經濟增長的大陸。市場潛力巨大，特別是在能源、消費品、電信、工業設備、物流和服務部門。哈佛商業評dissertation章（二月2009）題為“現在是時候在非洲投資說”可靠的數據表明許多撒哈拉以南國家已經出現在穩定的條件下，新的宏觀力量的沖突將產生深遠的影響，盡管全球經濟衰退–。現在，非洲公司表明，非洲大陸提供具有競爭力的制造業基地，信息技術外包和建筑服務。在非洲的地面上有真正的發展機會，但是，在非洲開展業務的挑戰，確實存在。這些措施包括窮人的基礎設施，運輸系統，不可靠的電力供應，后勤問題和決策缺乏信息，腐敗，只有少數?？梢哉f，最大的挑戰是缺乏可靠的信息，無論是在宏觀層面上，以及一個微觀層面。業務和決策網絡是非常具體的，在每一個領域都很重要，所以可能很難識別。

 

Africa is a world in itself. It is home to one billion inhabitants (around 15 percent of the global population) and 53 countries covering more than 30 million square kilometres, each with very different climates and environments. There are hundreds of ethnic groups and cultures approximately 2,000 spoken languages and stark contrasts in terms of political stability and economic development. It is a continent of growing local economies with important natural resources. The market potential is tremendous, especially in the energy, consumer goods, telecommunication, industrial equipment, logistics and services sectors. A Harvard Business Review article (February 2009) entitled ‘Now’s the Time to Invest in Africa’ says that “reliable data show that a number of sub-Saharan nations have emerged from conflict in stable condition and that new macroeconomic forces are poised to have a profound effect – despite the global economic downturn. Now, African companies indicate that the continent offers competitive manufacturing sites, IT outsourcing, and construction services. There is real opportunity on the ground in Africa.” Challenges to conducting business in Africa however, do exist. These include poor infrastructures, transport systems, unreliable electricity supply, logistical issues and the lack of information for decision making, corruption to name just a few. Arguably, the biggest challenge is the lack of reliable information, both on a macro level as well as a micro level. Business and decision making networks are very specific to each area and can be difficult to identify.#p#分頁標題#e#

 

隨著許多跨國公司在非洲各個領域投資，歐洲大陸已經變成了一個投資天堂，某些，零售商也抓住了機會。隨著消費者的生活越來越忙碌，對方便和價值的需求增加了。在南非的大男孩（零售商）正在推出新的出口格式。除了像Pick’n薪酬和Woolworths已經有新的球員冒險進入非洲市場的巨大增長地非洲大型零售商。提供外賣食物的渠道，如三明治，沙拉和包裝已從過去兩年的上升。通過在其較大的部門商店中引入食品和酒吧，增加其一站式商店的地位，來選擇“N”支付的標志是很晚了。介紹所有這些商店是一個巨大的指標，在非洲的巨大的未開發的食品零售市場。

 

With a lot of multinationals investing in Africa in various sectors, the continent has turned in to an investment paradise for a few, Retailers being one. With the increasingly busy lives of consumers the demand for convenience and value for money has gone up. Big boys (retailers) in South Africa are introducing new outlet formats. Besides big African retailers like Pick ‘n Pay and Woolworths there has been tremendous increase in new players venturing in to the African market ground. The outlets offering take away foods like sandwiches, salads and wraps have been on rise from last two years. Pick ‘n Pay is making its mark of late by introducing food and wine bars in its larger departmental stores adding to its One Stop Shop status. Introduction of all these stores is a significant indicator of the immense unexplored food retail market in Africa.

 

“To do business in Northern Africa, you must know specific information about each area you want to engage in business. And this is really complicated because of the lack of reliable business Information. Even when you refer to secondary information sources, you must be very careful and evaluate your sources, as there is often a problem in the way market research is conducted,” says M. Karim Ben Bouzid, Directeur Général Adjoint, Industrie des Confi series de Tunisie.

 

This White Paper gives an overview of Northern and Southern Africa, highlighting retail opportunities in Protein food products. This paper will also discuss in detail the retail growth in South African market and the sub-Saharan countries and the consumption preferences of Protein rich food in these regions.

 

2. NORTHERN AFRICA: MAGHREB + EGYPT

 

Introduction

 

Northern Africa is composed of 6 countries; Algeria, Libya, Mauritania, Morocco, and Tunisia (collectively known as the Maghreb) as well as Egypt in the East. Together, they represent one of the major entry points to the African continent. Each of these countries gained independence between the twenties to sixties; Egypt (1922), Libya (1951), Morocco and Tunisia (1956), Mauritania (1960), Algeria (1962).#p#分頁標題#e#

 

Picture will come

 

On February 17 1989, the Maghreb countries established the Arab Maghreb Union, aimed at promoting cooperation and future economic integration between the members (a Northern African Common Market). Due mainly to political reasons, the Union had very limited results to date. According to a survey by the Morocco Ministry of Economy and Finances, local countries have been exporting 51 times more to the European Union (EU), than to other Maghreb countries. Internal exchanges represent only three percent of total local exports.

 

Gdp table

 

In total, Northern Africa is a leading economic region in Africa, with gross domestic product (GDP) of US$444.9 billion. Its population of 158.3 million has a GDP per capita of US$2,810. Maghreb on its own has a population of 84.7 million, and a GDP per capita of 3.741 US dollars. Inside Maghreb, Algeria is the third largest African economy with a GDP of US$134.3 billion. Egypt is the fourth largest African economy, with a GDP of US$128 billion. The latter is the most populated Northern African country (73.6 million), in contrast to the largest Maghred countries, Algeria (34.4 million) and Morocco (31 million). GDP per capita also varies largely from one country to another. Libya and Algeria are in the lead, thanks to their energy revenues (US$11,484 and US$3,903), followed by Tunisia, Morocco, Egypt and Mauritania (US$3,423, US$2,422, US$1,739 and US$952) respectively. Egypt has been growing rapidly with a GDP growth (7.1%), followed by Libya, Tunisia, Algeria, Morocco and Mauritania. Algeria, Libya and Egypt rely on oil and gas production, while Morocco and Mauri

a, 2006; Nagayya and Rao, 2009). Microcredit is the component of microfinance. There are four components of microfinance:

 

Microcredit: It is a small amount of money lent to a client by a bank or other institution. Microcredit can be offered, often without collateral, to an individual or through group lending. The purpose of such a loan is to provide credit to those who require it.

 

Microsavings: These are small sums of money that allow poor people to save small amounts of money for future use. These saving accounts are often without minimum balance requirements. It helps low households to save in order to meet unexpected expenses and plan for future investments. These are the means of collateral to microcredit (Sinha, 2005).

 

Microinsurance: It is an economic instrument characterised by low premium designed to service low income people not served by typical social or commercial insurance schemes and helps in mitigating risks affecting property and health (Khandelwal A.K., 2007).

 

Remittances: These are transfers of funds from people in one place to people in another, usually across borders to family and friends (Khandelwal A.K., 2007).#p#分頁標題#e#

 

The Rise of Microfinance Movement / the Beginnings of Microfinance

 

The concept of Microfinance is not new as it has had its prevalence in the long past. The imprints of microfinance can be traced back to Indonesia which points towards the formation of Indonesian People’s Credit Banks which were set up in 1895 and which had close to 9000 units. Later, “efforts were made to bring about revolution in Pakistan (now Bangladesh) by Akhtar Hameed Khan in 1959 in form of formation of Academy for Rural Development” (Khandelwal, 2007).

 

In the late 1970s, the economists round the world recognised that poor lack access to financial services (McGuire and Conroy, 2000; Tiwari and Fahad,1997 ; Barman et al., 2009). From this developed a new emphasis on establishing better financial systems which could direct credit to poor clients on a more sustainable basis than had been possible under previous “discredited schemes of directed credit” (McGuire and Conroy, 2000).

 

At that time, Professor Muhammad Yunus popularised the concept of microloans as he believed that “peace prevails only when hunger is quelled” (Shetty and Veershekharappa, 2009). He started Grammeen Bank in 1976 in the outskirts of Chittagong University campus in the village of Jobra, Bangladesh with only a meagre amount of $27 as loan and made it a target to grant loans to the poorest of the poor. He felt concerned for the miserable landless women who were labouring for other people. He reasoned that if these women could work for themselves instead of working for others, they could

retain much of the surplus generated by their labours, currently enjoyed by others. He started giving loans to even beggars. He was also of the view that if beggars can go to houses for getting money, they can go to houses to sell a product also.

 

The Grameen Bank lending procedures are simple and effective. The first and foremost step in receipt of credit is the formation of the group of five members that gather once a week for loan repayment (Dasgupta, 2001). Loans are initially made to two individuals in the group, who are then under pressure from the rest of the members to repay in good time. The borrower has to repay the loan in weekly instalments spread over a year. The functioning of Grameen Bank also involves enchanting of "16 Decisions" at the start of their weekly session. These decisions include production of fruits and vegetables in kitchen gardens, investment for improvement of housing and education for children, use of latrines and safe drinking water for better health, rejection of dowry in marriages etc. Although observance of these decisions is not mandatory, in actual practice it has become a requirement for receiving a loan (Tiwari and Fahad, 1997).

 

In order to promote thrift habit, it is compulsory for every member to save one Taka per week which is accumulated in the Group Fund. This account is managed by the group. The amount in the Fund is deposited with Grameen Bank and earns interest. A member can borrow from this fund for consumption, sickness, social ceremony or even for investment (if allowed by all group members). In case of default in repayment or failure to attend meetings, the defaulters may be charged with a fine or may be expelled. The members are free to leave the group before the loan is fully repaid; however, the responsibility to pay the balance falls on the remaining group members.#p#分頁標題#e#

 

Some of the key strategies adopted by the Grameen Bank are listed below:

 

I) There is an exclusive focus on the poorest of the poor. This is exclusivity ensured by:

 

establishing clearly the eligibility criteria for selection of targeted clientele and adopting practical measures to screen out those who do not meet them.

 

in delivering credit, priority has been increasingly assigned to women.

 

the delivery system is geared to meet the diverse socio-economic development needs of the poor.

 

2) Borrowers are organized into small homogeneous groups. Such characteristics facilitate group solidarity as well as participatory interaction. Organizing the primary groups of five members and federating them into centers. The Centers are functionally linked to the Grameen Bank, whose field workers have to attend Centre meetings every week.

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3) Special loan conditions which are particularly suitable for the poor. These include:

 

a) very small amounts of loans given without any collateral

 

b) loans repayable in weekly instalments spread over a year

 

c) eligibility for a subsequent loan depends upon repayment of first loan

 

d) individual, self-chosen, quick income-generating activities which employ the skills that harrowers already posses.

 

e) close supervision of credit by the group

 

f)         stress on collective borrower responsibility or peer pressure

 

g) special safeguards through compulsory and voluntary savings to minimize the risks that the poor confront.

 

h) Undertaking of social development agenda addressing basic needs of the clientele. This is reflected in the "sixteen decisions" adopted by Grameen borrowers.

 

Thus, the lending operations of Grameeen Bank include the use of group guarantees, inculcating compulsory savings habit and transparency of credit transactions (Mcguire and Conroy, 2000). A still more interesting feature is the ingenious manner of grant of credit without any "collateral security". The availability of lending outlets near the clients, simple application procedures, and quick disbursement of loans are the special techniques to ensure good repayment rates (Tiwari and Fahad,1997 ).

 

“The Grameen Bank is now lending loan size of $ 800 million a year with an average loan size of almost $130, the bank has 7 million borrowers, 97 percent of them are women and an unmatched repayment rate of 98 percent”(Tiwari and Fahad,1997 ; Singh and Kumar,2008). The microloans not only helped the poor in getting finance in Bangladesh and facilitated the lives of millions of poor but also earned Muhammad Yunus a Nobel Prize in the year 2006.#p#分頁標題#e#

 

Evolution of microfinance in India

 

The Grameen Bank model of microfinance based on “joint liability” of members has received wide international appeal and popularity in numerous emerging economies like India. In fact the developing economies have even tried to replicate these models for developing small scale business and reducing poverty levels (Jha, 2002; Idolor and Imhanlahimi, 2011). The evolution of Indian MF can be broadly divided into four distinct phases:

 

Phase 1: The Cooperative Movement (1900-1960)

 

During this phase, there was dominance of two sources of credit viz. institutional sources and non-institutional sources. The non institutional sources catered to 93 percent of credit requirement in the y

ear 1951-52 and institutional sources accounted to 7 percent of total credit requirements pertaining to that year. The preponderance of informal sources of credit was due to provision of loans for both productive and non productive purposes as well as for short term and long term purposes and simple procedures of lending adopted. But they involved several malpractices like charging high rates of interest, denial of repayment, misappropriation of collaterals, etc.

 

At that time, government considered cooperatives as an instrument of economic development of disadvantaged masses. The credit cooperatives were vehicles to extend subsidized credit to poor under government sponsorship. They were characterized as non exploitative, voluntary membership and decentralized decision making. The Primary Agricultural societies (PACS) provide mainly short term and medium term loans and Land Development Banks provide long term loans as a part of cooperative movement.

 

Phase 2: Subsidized Social Banking (1960s – 1990)

 

It was observed that cooperatives could not do much as was expected of them. With failure of cooperatives, All India Rural Credit Survey Committee in 1969 emphasized the adoption of “Multiagency Approach to Institutional Credit” which assigned an important role to the commercial banks in addition to cooperatives. Even Indian planners in fifth five year plan (1974-79), emphasised “Garibi Hatao” (Removal of poverty) and the “growth with social justice”. It was due to this approach that in 1969, 14 leading banks were nationalized and later on five regional rural banks were set up for the purpose on October 2, 1975 at Moradabad and Gorakhpur in Uttar Pradesh, Bhiwani in Haryana ,Jaipur in Rajasthan and Malda in West Bengal. Hence, as a result of Multiagency approach and other planning initiatives, Government focused on measures such as nationalization of Banks (Shetty and Veerashekharappa, 2009; Sriram, 2005), expansion of rural branch networks, establishment of Regional Rural Banks (RRBs) and the setting up of apex institutions such as the National Bank for Agriculture and Rural Development (NABARD) and the Small Scale Industries Development Bank of India (SIDBI). The Reserve Bank of India (RBI) as the central bank of the country played a crucial role by giving overall direction for providing credit and financial support to national bank for its operations. Therefore, after the multiagency approach, the commercial banks and regional rural banks assumed a major role in providing both short term and long term funds for serving the poorest of poor.#p#分頁標題#e#

 

Despite, the multiagency approach adopted, a very large number of the poorest of the poor continued to remain outside the fold of the formal banking system"(Reddy and Manak, 2005; Singh and Kumar, 2008; Nagayya and Rao, 2009; Shetty and Veershekharap

pa, 2009). While these steps led to reaching a large population, the period was characterized by large-scale misuse of credit, creating a negative perception about the credibility of micro borrowers among bankers, thus further hindering access to banking services for the low-income people. However the gap between demand and supply of financial services still prevailed due to shortcomings of institutional credit system as it provides funds only for productive purposes, requirement of collateral, massive paper work leading to inordinate delays. As a response to failure of formal financial system in reaching the poor and destitute masses, the micro finance through Self-help groups was innovated and institutionalized in the Indian scenario.

 

“While no definitive date has been determined for the actual conception and propagation of SHGs, the practice of small groups of rural and urban people banding together to form a savings and credit organization is well established in India. In the early stages, NGOs played a pivotal role in innovating the SHG model and in implementing the model to develop the process fully” (Reddy and Manak2005).

 

The first step towards Micro-finance intervention was establishment of Self Employed Women’s Association (SEWA), non formal organization owned by women of petty trade groups. It was established on the cooperative principle in 1974 in Gujarat. This initiative was undertaken for providing banking services to the poor women employed in unorganized sector of Ahmadabad. Shree Mahila Sahkari Bank was set up as urban cooperative bank. At national level, SHG movement involves NGOs helping in the formation of the groups.

 

During this time, the planners and policy makers were desperately searching for the viable ways of poverty alleviation. Around that time, the Government of India launched the Integrated Rural Development Program (IRDP), a large poverty alleviation credit program, with the purpose of providing credit to poor and under-privileged which involved provision of government subsidized credit through banks to the poor. But the IRDP was a “supply led” programme and the clients had no choice over the purpose and the amount. At this stage, it was realised that the poor really needed better access to these services and products, rather than cheap subsidized credit. That is when the experts started talking about microfinance, rather than microcredit.

 

Keeping in view the economic scenario of those days, a strong need was felt for alternative policies, procedures, savings and loan products, other complementary services, and new delivery mechanisms, which would fulfil the requirements of the poorest, especially of the women members of such households ( Barman et al. 2009; Shetty and Veerashekharappa, 2009). It was during this time, NABARD conducted a series of res#p#分頁標題#e#

earch studies independently and in association with MYRADA, a leading NGO from Southern India, which showed that a very large number of poor continued to remain outside the fold of the formal banking system (Reddy and Manak, 2005). Later on PRADAN in its Madurai projects started forming women SHG groups” (Satish, 2005).

 

During 1988-89, NABARD in association with Asia Pacific Rural and Agricultural Credit Association (APRACA) undertook a survey of 43 NGOs in 11 states in India, to study the functioning of microfinance SHGs and their collaboration possibilities with formal banking system (Satish P, 2005; Shetty and Veerashekharappa, 2009). Both these research projects laid the foundation stone for the initiation of a pilot project called the SHG linkage project (Satish P, 2005).

 

Phase 3: SHG-Bank Linkage Program (1990 – 2000)

 

The failure of subsidized social banking lead to delivery of credit with NABARD initiating the Self Help Group (SHG) Bank Linkage Programme in 1992 (SBLP), aiming to link informal women's groups to formal banks. This was the first official attempt in linking informal groups with formal lending structures. “To initiate this project NABARD held extensive consultations with the RBI. This resulted the RBI issuing a policy circular in 1991 to all Commercial Banks to participate and extend finance to SHGs” (RBI, 1991). This was the first instance of mature SHGs that were directly financed by a commercial bank. “The informal thrift and credit groups of poor were recognized as bankable clients. Soon after, the RBI advised Commercial Banks to consider lending to SHGs as part of their rural credit operations thus creating SHG Bank Linkage” ( Reddy and Manak,2005).

 

The program has been extremely useful in increasing banking system outreach to unreached people. The programme has been extremely advantageous due to reduction of transaction cost due to less paper work and record keeping as group lending rather than individual lending is involved (Barman et al. 2009). The SHG bank linkage is a strong method of financial inclusion, providing unbanked rural clientele with access to formal financial services from the existing banking infrastructure. The major benefit by linking SHGs with the banks is that it helps in overcoming the problem of high transaction cost of banks as the responsibility of loan appraisal, follow up, recovery of loans are left to poor themselves. On the other side, SHGs gain by enjoying larger and cheaper sources (Varman, 2005).

 

Later, the planners in Ninth Five year plan (1997-2002) laid emphasis on “Growth with Social Justice and Equality”. The objective of Ninth plan as approved by the National Development Council explicitly states as follows:

 

“Promoting and developing participatory institu

tions like Panchayati Raj Institutions, cooperatives and Self –Help Groups”.#p#分頁標題#e#

 

Hence, it was ninth five year plan that expressly laid down the objective of establishment of Self Help Groups in order to achieve the objective of Growth with Social Justice and Equality” as a part of microfinance initiative. Meanwhile, in 1999, the Government of India merged various credit programs together, refined them and launched a new programme called Swaranjayanti Gram Swarazagar Yojana (SGSY). The aim of SGSY was to continue to provide subsidized credit to the poor through the banking sector to generate self-employment through a Self-Help Group approach (Sriram, 2005).

 

Phase 4: Commercialization of Microfinance: The first decade of the new millennium

 

This stage involves greater participation of new microfinance institutions that started taking interest in the sector not only as part of their corporate social responsibility but also as a new business line. A number of institutions have been set up overtime which were required to meet the credit requirements of the new society and downtrodden.

 

At present Eleventh Five Year Plan (2007-2012) aims at “Towards More and Inclusive Growth”. The word inclusive growth means including and considering those who are somehow excluded from the benefits which they (poor) should avail. Microfinance is a step towards inclusive growth via inclusive finance which moves around serving the financial needs and non financial needs of poor in order to improve level of living of rural masses.

 

Demand and Supply forces of microfinance

 

1.5.1 The Demand for Microfinance

 

Traditionally the targets of microfinance meant “the poorest of the poor” and “the poor”. More, recently, microfinance focus is changing as it has now started serving people who, although, not living in poverty, have general difficulty in obtaining the credit (Torre and Vento, 2006). This is on account of socio-economic changes that have put forward potential new microfinance clients. In this way, modern microfinance is expanding its horizon from “poorest of poor” to “the victims of financial inclusion”. The phenomenon of financial inclusion has been defined in literature as “inability to access finance in an appropriate way” ( ). These victims of financial inclusion involve “disadvantaged individuals” who are unable to bear the cost and conditions of financial products offered. Another category of microfinance targets included the “marginalised people” who mainly comprise of small scale entrepreneurs who are running small businesses, self-employed workers and individuals who unable to obtain credit (Torre and Vento, 2006). In this category, women assume major significance. This is due to the more responsible nature

of women who are more responsible in repayment of loan then men. The continuing involvement of “poorest of the poor”, “poor”, “disadvantaged” and “marginalised” people determines the greater complexity of the supply forces of Indian microfinance structure and thus, a more decisive move away from traditional pattern of credit.#p#分頁標題#e#

 

1.5.2 The Supply of Microfinance

 

In any economy, most of the day-to-day activities require finance. Finance is required both for productive and non productive purposes. The productive purposes include requirement of fixed capital for commencement of business, funds for working capital requirement to meet day today activities, trade related emergencies, exploring investment opportunities etc. On the other hand, finance may be needed for non productive purposes, such as for celebration of marriages, births and deaths, for litigation. In order to satisfy in above needs there are two available sources of credit available to the poor: institutional sources or formal sources, non-institutional sources or informal sources.

 

Formal institutions are the registered entities subject to all relevant laws. These include commercial banks (including public and private sector banks), regional rural banks and cooperative banks. Recognizing the potential of micro finance to positively influence the development of the poor, the Reserve Bank, NABARD and Small Industries Development Bank of India (SIDBI) have taken several initiatives over the years to give elevation to the micro finance movement in India. The Commercial Banks and Regional Rural Banks provide both short term and long term funds for serving the poorest of poor. The Primary Agricultural societies (PACS) provide mainly short term and medium term loans and Land Development Banks provide long term loans.

 

The National Bank of Agricultural and Rural Development (NABARD) is the apex institution at national level for agricultural credit and refinance assistance to the agencies mentioned above .The Reserve Bank of India (RBI) as the central bank of the country plays a crucial role by giving overall direction for providing credit and financial support to national bank for its operations. On the other hand, government owned societies like Rashtriya Mahila Kosh(RMK), Mutually Aided Cooperative Societies, private sector companies like specialized NBFCs are also involved in providing credit to the poor.

非正式制度包括自助團體、貨幣出借人、商人、親戚、委托代理人。他們是一個自愿的基礎上的小額信貸服務的提供者，不受任何形式的監管。

Informal institutions include self help groups, money lenders, traders, relatives, commission agents. They are providers of microfinance services on a voluntary basis and are not subject to any kind of regulation.

 

1.6 Self Help Groups Defined

 

A Self Help Group is a basic unit of micro-finance which comprises of 15 to 20 people having  homogeneous social and economic background (Singh and Kumar, 2008) that voluntarily come together to save small amounts regularly and mutually agree to contribute a common fund. The aim of such formation is to meet present and emergency needs of the members on mutual help, solidarity and joint responsibility basis.#p#分頁標題#e#

 

Self Help Groups (SHGs) are necessary to overcome exploitation, create confidence and creation of feeling of self worth for the economic and social self-reliance of rural poor, particularly among women who are mostly invisible in the social structure. The Self Help Groups are the basis for further action and change which help members become self reliant economically and socially. It also helps building of stable relationship for mutual trust between the promoting organization and the rural poor (Singh and Kumar, 2008).

 

雖然貸款償還是本集團的連帶責任，但在現實中，個人責任是強調的（Singh和庫馬爾，2008）。維護集團聲譽導致了巨大的同伴壓力的應用。本集團成員使用集體智慧和同儕壓力，以確保信貸適當利用，并及時償還其。事實上，同伴的壓力已被公認為一種有效的替代絡（巴曼等人。2009）。

Though loan repayment is a joint liability of the group but, in reality, individual liability is stressed upon (Singh and Kumar, 2008). Maintaining group reputation leads to the application of tremendous peer pressure. The group members use collective wisdom and peer pressure to ensure proper utilization of credit and its timely repayment thereof. In fact, peer pressure has been recognized as an effective substitute for collaterals (Barman et al. , 2009).