Microfinance: small loans add up to a priceless investment in community
There’s an old saying: If you give someone a fish, they can eat for a day. Teach them to fish, and they can eat for a lifetime. When microfinance enters the story, however, the meaning of that adage is significantly broadened. In other words, an entire community is provided with the means to fish together, enabling them to eat for a lifetime.
From a few, small fish…
One of the Faces of Microfunding
Magaly Peña
Loan Request: $340 for hair products and various cooking ingredients. Magaly is an entrepreneur at heart. While many clients struggle to keep one business alive, Magaly operates two with ease. She not only sells hair products but has also started a ‘fritura’, a small stand that sells various meat snacks such as empanadas and fried pork. She has very little free time as her businesses and four energetic sons keep her extremely busy. Starting with only 5,000 pesos (approximately $120), Magaly invested her initial loan in some basic, commonly used hair products to sell from her home. With the income generated from selling these products and with the help of her second loan Magaly ventured out of her home to create a broader client base, traveling by bus to various communities in the greater Sabana region. Even though her first business was growing, she realized that she would need to find an additional way to support her family. Magaly had always enjoyed cooking, so it only seemed logical to make and sell her favorite snacks at a little corner stand. She has been operating both businesses for over one year now. As a single mother, Magaly has not only been able to feed, clothe, and educate her children, but she has also slowly been constructing a new home. She is in the midst of upgrading from a small, wooden house to one made of sturdy cement blocks. It is a long process as she sporadically adds a little bit to the structure with her extra savings, but it is a dream that will surely come true in the future.
From the HOPE International website (www.hopeinternational.org) |
Microcredit involves providing small loans (microloans) for individuals with little or no collateral who would normally have no other means for receiving credit. If a fisherwoman obtains a microcredit loan, she is able to purchase a boat and tackle to fish more effectively, thus feeding her family and even selling fish in the marketplace.
The benefits go beyond the amount of money available or the number of fish caught. Steven Spicer, a member of Messiah College’s Human Rights Awareness group, points out, “Because it is a loan, rather than aid, it allows people to use and build their own skills to take care of themselves and have a sense of accomplishment.”
In practice, the loans are usually provided for amounts under $1,000 and are offered primarily to women, whose strong sense of family and community generally result in a responsible use of the funds and a timely pay-back. This, combined with teaching a Christian understanding of loving your neighbor, produces the greatest good for the community.
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The microfinance information table in the Boyer Alcove. Photo by Scott Markley |
Partnering with HOPE International, the Human Rights Awareness group selected three entrepreneurs to support this year: Fedr Kraich in Mukachevo, Ukraine, for an inventory of bicycle parts; Magaly Peña in Sabana, Dominican Republic, for hair product sales and a food stand (see sidebar); and Dorcas Masengu of Kinshasa in the Democratic Republic of Congo for a food stand.
…to feeding a multitude
Microfinance involves initiatives which are broader in scope, such as assisting a community in setting up their own savings and loan association. As a fisherwoman begins to pay back her loan, that money can be loaned out to others as “seed” money to start or enhance other businesses that will benefit the community. Now, a boat builder and a bait seller can begin to make a living, too.
When the loans and loan owners are pooled into groups, individual entrepreneurs are able to cover one another’s losses. For example, a fisherwoman may have a successful season while a farmer may endure a drought. This grouping provides economic security within the community and fosters a sense of accountability for members to their neighbors, leading to still higher pay-back rates.
Microfinance and Messiah: The Zambia Project
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MED group members |
Last summer, a team from the Collaboratory’s Microeconomic Development group (MED) group traveled to Zambia to start two savings and credit associations, under the Village Savings and Loan Association (VSLA) curriculum. Lawrence Williams ’11 was the site team leader, and the team included Mary High ’12, Laura Grovatt ’09, Ali Smith ’11, and Jess Fravel ’11. Matt Nissley ’08 traveled along as group adviser, and the team met with Christine Forsythe from Messiah’s Art department while in Zambia.
Williams comments on the extensive preparation the team had before leaving for Zambia:
“We spent about 5 months going through the material and dissecting each segment of the document [VSLA curriculum] and concepts. We then spent about 4 months in critical in-depth planning to develop lesson plans and to adjust the program to suit the needs of the people we were working with. Ron Herr, Zambian Economic Development Director for the Mennonite Central Committee, worked with us during the planning phase and was our host during our stay in Zambia.”
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MED and VSLA group members |
When they arrived, team members had the opportunity to train 30 members of the village in the work required to set up and operate their own VSLA. Applying microfinance concepts in a real life setting was a remarkable experience for the team, and Williams explains how the process impacted him:
“Probably the most memorable part of the trip was being placed in the middle of a village in Zambia with nothing but my shirt on my back, love for God, education at Messiah, and desire to help these people, while trying to train an association of 30 members on how to work as a community to save and borrow capital on a micro-level with macro benefits. Knowing that those three weeks of our time continues to help these people day after day is such a rewarding feeling.”
This initial effort by the MED team was very successful, and the people in Simaubi have already reaped many benefits from the program. Based on a current report from the end of 2009, the two associations have more than 3,000 Kwacha (Zambian currency) saved so far and have taken out more than a dozen microloans using the VSLA program.
The MED group will again assemble a team to travel to rural Zambia in May 2010 with the goal of starting three more savings and credit associations.
Article co-authored by Alex DeHart ’10 and Craig Hise ’90
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