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                   HELPING PEOPLE HELP THEMSELVES

Banking and financing are a part of our everyday  lives; something normally taken for granted. When needed, most people can have easy access to banks’ lending programs and other financial services. However, there are many low income people who desperately need financial credit and support. They are not able to borrow from traditional banks or financial institutions as they often have no steady income, no credit history nor the required collateral.So, how can these people be helped?  They can be helped through micro credit and micro financing.

Micro Finance has been summarized as “banking for the poor.” Microfinance is permanent access to a range of financial services for poor and low-income clients, such as savings, insurance, fund transfers as well as credit.
Micro Credit consists of making small loans, usually less than $200, to individuals who normally do not have a regular salary, to establish or expand a small, self-sustaining business. The credit is provided by legally registered institutions called microfinance institutions (MFIs).

A Typical Example of Micro Credit - A woman may borrow $50 to buy chickens so she can sell eggs. As the chickens multiply, she will have more eggs to sell and she can eventually sell little chicks, expanding her business further.   Each new phase of expansion often requiring her to  borrow money will help lift her further out of poverty.

Recycling of Loan Dollars – Multiplier Effect - An important key to microfinance is the recycling of loan dollars. As each loan is repaid, which on average is between 6 to 12 months, the money is recycled as another loan to another person, thus multiplying the value of each dollar. Micro credit has been successful towards the fight against global poverty.

Common Question - Do low income and very poor people repay their loans? Yes, microfinance clients are excellent credit risks. The repayment rate is between 95 and 98 percent. In fact, it is higher than the repayment rate of student loans and credit card debts in the United States.

                 MICROFINANCING FOCUSES ON WOMEN

The Grameen Bank has 7.5 million borrowers, of whom 97% are women. Nuzha al-Huzael, manager of The Sawa Group project, a registered MFI, administers a micro loan program in the Middle East. The program offers traditionally cloistered Bedouin women in Israel, making small handcrafted items a chance to borrow money to become small entrepreneurs enabling them to help earn money for their family.  In Huzael’s opinion, Bedouin women are easier to work with than their male counterparts and often more reliable.  His observation is shared in many other cultures and is probably one of the main factors accounting for women receiving a higher percentage of micro loans from MFIs on a worldwide basis.

Women have also proven to be great poverty fighters. Experience and studies have shown that they use the profits from their businesses not only to expand their businesses but to send their children to school and improve their families’ living conditions.

                      MICRO-FINANCING SUCCESS STORIES

Handicrafts in Mexico- Andea  Diaz has been making textile handicrafts for the last twelve years. At 36, she is married and has 6 children. Before she became a client of Grameen Foundation partner AlSol, she embroidered her fabric and maintained a small production. Many times she would not be able to meet the demand for her crafts because she did not have enough resources to invest in her small business. When Andrea began as a client of AlSol, she received an initial loan of 500 Pesos (about US$ 50.) With the first loan, Andrea was able to purchase fabric so that she could increase her supply of embroidery products. With the subsequent loans she purchased additional raw materials to further expand her business.
Andrea’s participation in AlSol and the subsequent growth of her business have had tremendous impact on her family’s life. “Since participating in the program I have purchased land, improved my family’s nutrition, and supported my children through school. I expanded my business and constructed two additional rooms onto my home, which I now use to sell my products from.”

Wines and Pigs in Cambodia- Phal An is a rice winemaker in Cambodia. She used a $700 Kiva micro loan  to purchase more rice to meet the demands of ten wine distributors who sell her wine across the country. She uses the rice byproducts from the winemaking process to feed the family’s pigs, and has recently been able to turn a profit on excess pig feed.

Peanut Butter Making in Uganda- Grace Ayaa is a peanut butter manufacturer in Uganda. She  used a $475 Kiva micro loan to finance a refrigerator for storing extra inventory. Her business now successfully supports a family of fifteen (six biological, and nine adopted) children.

Phone cards and groceries in Kenya- Petonilla Shivachi is a grocer in Kenya. She  used a $500 Kiva Micro loan to stock new products in her store, including cold soda and mobile phone cards. The phone cards alone attracted 70 new customers in just four days. Since then, her business has been so profitable that she has opened and staffed two additional stores and a restaurant.