from the Langley Times
Bigger is better. At least, that’s the mentality of those in the developed world. But in developing countries, small starts are helping poor entrepreneurs to expand their enterprises.
Most people in Canada have never heard of microcredit loans, but there are an estimated 150 million microcredit borrowers worldwide in many different developing countries. At its core, microcredit is simply the lending of small amounts of money to the poor at reasonable interest rates. As trivial as the concept may seem, it is anything but.
My current assignment here in Kabala, a small town in northern Sierra Leone, is to work alongside local staff to develop a microcredit program as part of CAUSE Canada’s business development training.
The training is for women who currently have a small economic activity that contributes to household income.
The initial loan is small, around $50CDN, but for these entrepreneurs, a small amount of money can go a long way: with the loan, women are able to purchase additional quantities of vegetables, cloth, rice or whatever they may sell.
The morning of Thursday, Aug. 14, was the first disbursement day of the program. I awoke before the sun at 6 a.m. as we needed to get to the communities where we were disbursing before the women go to the farms, as August is the busiest month for farming around Kabala.
It is also the rainiest, and if I was looking for a good omen when I awoke, I was not going to get it — the rain was just as heavy as it was when I went to sleep the night before.
After meeting with the CAUSE Loan Officer, we ventured out the first community, Sarakoh. As we arrived, we saw several women gathered under a shelter along with other community members. The rain did not dampen the smiles on their faces or the excitement in their eyes. For all of these women, it was the first time they would ever receive a loan.
The money was greeted with cheers and singing, a sight not seen back in financial institutions in Canada. The cash disbursed here was more than bills and coins; it was a chance to invest, an opportunity to grow, an invitation for change.
In many developing countries, banks have excluded the poor from accessing financial services. Through large minimum loan sizes, requiring illiterate applicants to fill in forms, and requiring loans to be guaranteed with collateral, the poor are unable to get a step-up — or out — of their current circumstance. Furthermore, many regions have no access to financial institutions at all.
In Africa less than 10 per cent of the population has an account at a financial institution. In both of these cases, lump sums of money have traditionally been provided in informal ways, one of which is through community moneylenders who charge high interest rates for loans.
Microcredit eliminates these barriers to accessing capital and charges interest rates that do not exploit the borrower’s circumstances. Because material collateral is not possible in most microlending situations, collateral is created through the formation of solidarity groups.
These groups consist of usually four to six women who mutually agree to guarantee the loans of the others. Believe it or not, an exceptionally high amount of the loans are paid back. Most microcredit loan programs have repayment rates of 95-98 per cent.
Link to full article. May expire in future.
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