Microfinance
Micro finance - the concept of lending small amounts of money (starting from £40.00) to the poorest of the poor to equip them to trade themselves out of poverty may appear to be a far fetched dream of an idealist.
In the past year micro-financing has been growing through A Call to Business in Sierra Leone quite rapidly. Currently we have over 400 loans in issue to all number of business types. Administration of the loans is headed up by our own office in the capital of Freetown. Locally, we use regional co-ordinators to administer the loan in the provinces. These regional co-ordinators are often local church pastors who take on a responsible and trusted role as well as providing pastoral support where required.
One of the many considerations in unsecured lending of this type is the subject of defaulters. Our experience has been very positive with default rates currently sitting around 3%, there is a clear intention from clients that they wish to repay their loans in order to succeed in business. By successfully repaying a loan, many clients are able to take a second loan to further grow their business by acquiring better equipment, stock, machinery and premises.
There are clear cultural differences to consider when advancing micro-loans in Sierra Leone. It is common for loans to be advanced to female entrepreneurs who take greater ownership than their male counterparts. Amounts may be small in nature but huge in impact. All transactions tend to be handled in cash. The ethos we encourage is for businesses to be both successful and philanthropic, encouraging individuals to give and share their profits to the areas of greatest need in their communities.
Having operated an initial loan fund of around $40k, we aim to expand the fund to around $100k which will involve increasing activity both within Sierra Leone and outwards towards Liberia and Guinea.
There are a number of ways to get involved in micro-financing both through mainstream internet sites (eg www.Kiva.org) and also through A Call to Business. Our expo trips, usually held twice a year, provide the opportunity to personally see how money invested into micro finance has been utilised. On the most recent trip to Sierra Leone, individuals were able to meet the clients and in some cases offer extra business support from both exploring new markets, linking up for export and provide training materials which have proved to be invaluable to the clients.
Here's one testimony from a recent trip.
I went to Sierra Leone for a second time this year to investigate if the monies provided to a micro finance venture would actually make a significance difference directly to the lives of those who were given these micro loans. On a hot humid Saturday afternoon in a Government building in Freetown 200 people gathered to hear the good news stories first hand from about a dozen of the recipients of micro loans. There have been around 400 loans provided so far, which means that at least 4000 individuals have been positively impacted by the economic improvement of these small businesses. This means that children are attending school more regularly; it means that the family will have a good meal every day and the supply of fresh clean water would be more accessible.
The businesses varied hugely - a carpenter's workshop, a clothes stall and cosmetics to supplying cooking gas.
- Muriel was asked if she would like a micro loan - at that time she was selling biscuits under a mango tree in Grafton. The loan has enabled her to change her life totally. She moved from the dust and grime of the mango tree to a kiosk and now she has a shop which is selling provisions in the village of Grafton.
- Another lady who had a rice cooking stall had a micro loan which has totally transformed her life, enabling her to change direction and follow her love of clothes and cosmetics. This lady is very successful and she currently has a loan of 6 million Leone's (about £1500). This is a large loan and she is ambitious for more success. She understands the benefit of working capital and her loans have been repaid and once they are repaid the amount of the loan can be doubled. This lady is focused and has had quick growth in her new business.
A young man who is a carpenter spoke to us about how the micro loan has enabled him to make two sets of his dining room furniture and therefore increase his profit twice as quickly. He has also been able to employ 2 new members of staff. He is very clear and focused and is looking forward to an increase in working capital so that he can enlarge his business and employ more people.
The Micro loans to date have helped to provide 30 new jobs which is a wonderful result and as these businesses continue to grow so will the positive impact upon the lives of the owners and their staff.
It is truly wonderful how much difference a small loan can make to the lives of those who are themselves determined to work hard and who know how to trade their chosen produce. The history of micro finance shows that the women are the most reliable in managing these loans and their repayments, so it was very encouraging to see and hear from some of the men. My hope and prayer is that over the next six months more lives will be improved by these micro loans and that those who currently have a loan are able to go from strength to strength.