Food Crisis Taking A Toll on Microfinance Clients

The food crisis is taking its toll on Opportunity’s microfinance clients. Opportunity International is one of the largest and oldest microfinance networks, and I’ve seen first-hand how a small business loan or a safe place to save hard-earned money can make a big difference in keeping food on the table for the poor. Yet in 16 years of working in microfinance, I haven’t seen anything quite like global reach of the current food crisis.

One of Opportunity’s clients in India, Selvi Mani, just told us:

“We have reduced our consumption of vegetables and meat. Last week, we went to the market and brought provisions for ($4.50) This week, the same items cost ($7).”

In Mozambique and Ghana, clients are tapping into their savings accounts to buy food, make their loan repayments, and keep their businesses going. The good news is that they have savings accounts for the first time in their lives—but the bad news is they are already eating through the small safety nets they had built up.

In Rwanda, clients are taking their children out of school.

Opportunity is focused on long-term solutions to hunger, and we’re convinced that basic financial services are absolutely critical in allowing the poor to manage their money and protect themselves from shocks. But meanwhile, we’re also tapping into our infrastructure of 6,000 loan officers worldwide who are now refocusing their weekly business training sessions – helping our clients cut costs, diversify their businesses, and manage their personal finances.

In the Philippines, Opportunity is preparing to sell emergency food supplies to clients at discounted rates. In Ghana, our Trust Groups (lending groups) are helping to identify those in the community who are most at risk.

In Malawi, Opportunity’s crop insurance program has yielded average increases of 150% for several thousand small holder farmers, and we are expanding this program in sub-Saharan Africa and Asia.

It’s all hands on deck, and that doesn’t seem likely to change any time soon.

-Susy Cheston, Senior Vice-President, Policy, Opportunity International

To learn more about our work, please visit www.opportunity.org

It Takes Money to Make Money…

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

Microfinance in Uganda

Several members of ONE’s staff are traveling through Uganda and Rwanda this week. I just received an email from ONE’s Margaret McDonnell who met with beneficiaries of a Kampala, Uganda microfinance program today.

Before her email, a little background on microfinance:

Because it is often difficult to find paying jobs in poor countries, many people earn a living by starting and operating their own small businesses. Examples of these types of businesses could be selling fruits or vegetables at a local market, or providing basic services such as sewing clothing. Often these small businesses can’t access credit or other financial services to grow and develop their business and provide for their family and community.

Microcredit and microfinance programs like these described below are especially important for women, who often don’t have access to financial resources in the way that men do in these countries. U.S. funding for microcredit/microfinance programs in recent years has been approximately $200 million annually.

And now Margaret’s post:

“This afternoon we met with Swabrah Scovia, who works with FINCA, the Foundation of International Community Assistance. She brought us to visit beneficiaries of one of their microfinance programs in the Naguru neighborhood in Kampala, Uganda.

The 12 women shared their stories about how the loans have helped them start or grow their own businesses, ranging from vegetable stalls to second-hand clothing shops. Loans start at the equivalent of 25 dollars and can grow to 5,000 dollars over time and with proven credit. The women have become very close and operate like a team, meeting bi-weekly to share their business plans, meet their financial commitments, and help each other through daily life challenges.

I will never forget the pride on the womens faces when they described being able to provide food for their families and to send their children to school.

- Margaret