Assessing the impact of fund diversion on the sustainability of microfinance among the women of Pirang, The Gambia

The purpose of this study is to evaluate how fund diversion affects the sustainability of microfinance among female borrowers in Pirang, a rural Gambian community that heavily relies on microfinance programmes to support their way of life. The study looks at how their loan repayment and long-term financial stability are impacted by economic difficulties and a lack of investment expertise. The study also investigates how borrowers and institutional personnel perceive the reasons behind fund diversion and its effects on financial inclusion, poverty reduction, and MFI sustainability to gain a better understanding of these issues. Employing a mixed method, the study gathers data from 39 participants, which comprises 30 female borrowers and 9 staff members of Reliance Financial Services (RFS). To conduct the analysis, descriptive statistics were used to examine the demographic profile of the participants, loan usage patterns, and repayment behaviour, while thematic analysis was used to assess the qualitative responses on why diversion occurs, its effects on the financial stability of both borrowers and MFIs, and the social consequences, which include stress, stigma, and relationship problems. The findings revealed that fund diversion is not an isolated phenomenon; it's driven by structural, financial, and poverty-related challenges. The study demonstrates that borrowers experience a major debt cycle because they spend their borrowed money on nonproductive activities. Microfinance organisations use regular payment collections to support their operations, yet these practices result in long-term operational difficulties for the organisations. The study concludes that financial education, coupled with community monitoring mechanisms and regulatory measures to boost the success of microfinance programs are essential components that particularly help vulnerable communities such as rural women. The research study offers recommendations for enhanced financial access, advanced monitoring with supportive approaches, introducing flexible loan products, integrating financial literacy training, social protection mechanisms, income diversification, and addressing root causes of fund diversion, which will empower microfinance institutions to meet their goals of poverty reduction and economic empowerment.