This past week I had the pleasure of visiting beneficiaries of one of our mico-finance programs. One thing I really respect about my organization is the evolution of our programs. Years ago our organization was merely a foster home, which didn't really address the true cause of vulnerable children. Our approach has slowly evolved to the point where we now not only address children coming in off the streets in our transition home, but we also work with their families after reunifying them. This is a critical component as it does no good to reunify a child with a family in extreme poverty. They will likely meet the same problems that caused them to leave in the first place.
One of my frustrations with many large donors is their lack of acceptance for mico-finance programs. Most donors want to provide money to families to start businesses but refuse to allow programs that have any type of repayment. As someone who has worked doing alternative livelihood and micro-economic development in several countries for several years, I will tell you that in my opinion, this generally does not work. Why most grant organizations will not accept these types of programs is beyond me as international development literature strongly advises against simply providing people with money.
Interestingly enough we have two funders that each take one of the aforementioned approaches. One funder does not allow us to set up any type of loan system, rather the beneficiaries are strongly encouraged to set aside savings. A different donor encourages us to assist communities in setting up groups and giving them business training and management of their loans.
Not only do beneficiaries in the second group show more success in their businesses but they also demonstrate increased capacity to manage their finances and organization. For example, one of our groups has set aside (independently of our instruction) a separate collection to either serve as emergency funds if a member has an emergency and defaults, or for use to disburse more loans and increase their membership. This type of forward thinking coming from a newly-formed community group is the type of indirect benefit that development organizations strive for.
I had the opportunity to meet with the second group in Arusha last week. There were two groups consisting entirely of women, one group with 11 people and another with 14. One group had been in existence for three months and the other group was meeting for the first time after receiving their loans. We have monthly meetings with the beneficiaries to collect money and discuss challenges and success stories.
Hearing the women's stories was as humbling as it was inspiring. All the women had never worked or even participated in an income-generating activity. The sense of empowerment and pride that they displayed was remarkable. They all spoke of an improved economic situation that not only allowed them to provide things for their children like school fees, uniforms and books, but also provided stability to their entire family. They were extremely grateful for our presence and continued support of their group. They spoke of their different businesses: selling charcoal, buying maize wholesale and selling it in smaller amounts, selling spices, second-hand clothes, tailoring...pretty much every industry was represented in an innovative manner. I don't want to be dramatic, but these women wore the face of a lifetime of poverty making their excitement and gratefulness all the more apparent. Powerful stuff.
And you know how much our loans are? About $190.00. These loans are repaid interest free for two years, meaning the monthly payment is about $16.00. In my opinion, the best part is, at the end of two years, we will have money to provide loans to yet another group of beneficiaries. And hopefully the group members' success will have spread throughout the community resulting in an eager pool of beneficiaries anxious for loans to improve their life. All that remains are administrative costs for our staff to do follow ups (they check monthly on each beneficiary as well as the monthly group meetings) and money for the initial training (one week for both group formation and financial management). With all the money that's gone into international aid, I believe these types of projects to be the most effective.
One of my frustrations with many large donors is their lack of acceptance for mico-finance programs. Most donors want to provide money to families to start businesses but refuse to allow programs that have any type of repayment. As someone who has worked doing alternative livelihood and micro-economic development in several countries for several years, I will tell you that in my opinion, this generally does not work. Why most grant organizations will not accept these types of programs is beyond me as international development literature strongly advises against simply providing people with money.
Interestingly enough we have two funders that each take one of the aforementioned approaches. One funder does not allow us to set up any type of loan system, rather the beneficiaries are strongly encouraged to set aside savings. A different donor encourages us to assist communities in setting up groups and giving them business training and management of their loans.
Not only do beneficiaries in the second group show more success in their businesses but they also demonstrate increased capacity to manage their finances and organization. For example, one of our groups has set aside (independently of our instruction) a separate collection to either serve as emergency funds if a member has an emergency and defaults, or for use to disburse more loans and increase their membership. This type of forward thinking coming from a newly-formed community group is the type of indirect benefit that development organizations strive for.
I had the opportunity to meet with the second group in Arusha last week. There were two groups consisting entirely of women, one group with 11 people and another with 14. One group had been in existence for three months and the other group was meeting for the first time after receiving their loans. We have monthly meetings with the beneficiaries to collect money and discuss challenges and success stories.
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| Group members discuss the loan repayment as our community engagement facilitator examines the numbers. |
And you know how much our loans are? About $190.00. These loans are repaid interest free for two years, meaning the monthly payment is about $16.00. In my opinion, the best part is, at the end of two years, we will have money to provide loans to yet another group of beneficiaries. And hopefully the group members' success will have spread throughout the community resulting in an eager pool of beneficiaries anxious for loans to improve their life. All that remains are administrative costs for our staff to do follow ups (they check monthly on each beneficiary as well as the monthly group meetings) and money for the initial training (one week for both group formation and financial management). With all the money that's gone into international aid, I believe these types of projects to be the most effective.
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