I just read a news story describing how microfinance schemes in Ghana (and the banks providing them) are being undermined by a refusal to repay loans. According to the article, "The microfinance programme, which is the bedrock of rural banks, is being thwarted due to the attitude of some customers, which is creating many problems for the banks... some people had the perception that the money belonged to the government and was therefore free."

While working in India, I heard similar sentiments about repaying loans. In rural areas, there seemed to be a lack of consequences associated with failure to repay an institutionalized loan (as opposed to a local moneylender). This attitude may be the result of years of government rural development schemes in the form of grants rather than loans. Or it may be a lack of adequate enforcement outside urban areas. Whatever the cause, a cultural belief that money loaned by an institution need not be repayed is likely to slow the entry of larger commercial institutions into this arena, resulting in less microloans being made available to those who need them.

The solution proposed in Ghana was to provide adequate education to the groups and individuals before granting them loans, so that they know their repayments benefit others like themselves. But is this enough? I'm wondering if anyone else has had experience in this area. How widespread is this attitude and what is being done to combat it?