It takes money to make money, but poor people in Mozambique don’t have access to credit. Commercial banks don’t want to lend to them because there is no incentive in lending tiny amounts of money in such high-risk, isolated areas. Today, I visited Matola province in Mozambique. I met with Opportunity International, an incredible organization that gives microfinance loans to individuals and groups.

Microfinance loans are small amounts of money (often as little as $50 or $100) that enable very poor people, especially women, to start or expand small businesses. These loans are a vital resource in poor communities, where people have trouble accessing credit from traditional banks and money-lenders often charge exorbitant interest rates.

Their average loan from Opportunity International is small - around $170 dollars - and after just two years of operation the organization is already breaking even in the country, meaning it can expand its operations to reach even more people.

Study after study has shown that in spite of high levels of poverty, high risk and rapidly changing environments, good microfinance programs boast a repayment rate of more than 95%. Evidence also indicates that income generated from microfinance projects can spur wider development benefits because borrowers, especially women, are likely to use their extra income to invest in health care or education for their families.

We were taken to meet two groups of women whose lives had been transformed by the loans. They were able to use their money to buy stock to sell at their market stalls selling biscuits, clothes, charcoal etc. One woman had even used her money to open a restaurant. The great thing about talking to these women was how happy they were. They were so cheerful and delighted to show us around.

One woman, Rabia, has five children who live with her (in fact we met two of them - they were doing their homework at their mums stall). Rabia has one of the best success stories. She took us to see her old house, which was tiny and made of iron sheeting, and the new one she is building with the proceeds of her stall (picture above). The new house is huge (bigger than my house!) and really well organized - one room is bigger than her entire old place. As you can imagine, we were really inspired by these women.

It’s important to keep things in perspective though. One woman we spoke to was happy that she had increased her income, but she still only spent $4 a day on feeding her family of 5. It was fantastic to see what a difference a small loan could make to peoples’ lives, but we could also see that there is a long way to go to lift the community out of poverty.

-Hermione Davies

This entry was posted on Tuesday, May 13th, 2008 at 5:21 pm and is filed under May Mozambique Trip, Mozambique, Microcredit/Microfinance, ONE, Opportunity International. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.