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There is no bigger challenge in Microfinance than appraising loan applications. Most of the information declared by the potential borrowers is lies, not worth the paper it’s written on. Earlier this month I got an apt example of this. A lady selling second hand clothes in downtown Nairobi presented this application for approval.
The sheer numbers of items she claims to have in her inventory struck me as odd, even weird. How can a shop of 6ft by 6ft hold (36sq. ft) stock almost 1000 bras amongst other merchandise? A large store like Nakumatt does not even stock 500 panties in their 3000 sq. feet clothing stores!
As is usual, we sent someone to verify the customers stocks. The numbers were even more obnoxious. 
It then occurred to me that the customer had collected stocks from her fellow traders for the appraisal show!
And there goes the largest challenge facing microfinaciers. How can one obtain the correct stock values?
Instead of declaring the correct information so they can be assisted, microfinance customers make extravagant attempts to overstate their borrowing capacity. In the end, they borrow more than their capacity, misuse the money and end up in ever bigger debt & poverty trap
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