Microfinance is a method by which poor women are provided with small loans to start or expand a business. The microfinance model has been implemented successfully in many developing countries. The loan capital is used to start a small business and over time as the business grows, the women are able to repay their loans. Worldwide, the repayment rates for micro credit vastly exceed that of traditional banking.
In 2005, Power of Love launched a micro loans program to help grandmothers in Africa take care of their families. The HIV/AIDS epidemic has destroyed the fabric of the African community and many of the households are headed by grandmothers caring for 5 or more orphans. These grandmothers do not have a permanent source of income and struggle against odds to provide regular food or support to the family.
POL realized early in their work with HIV+ children that in order to be successful in making a real difference in their lives, the grandmothers needed help to obtain a regular source of income. A program was developed to take into account the special circumstances (high incidence of HIV/AIDS) of the loan recipients - many could die during the loan process, all of them spent a large part of their day in providing care to one or more sick children, and the fact that they were themselves aging grandmothers. Unlike traditional microfinance programs, it was decided to focus not just on successful loan repayment but on positive proof that the loan recipients’ lives were being improved.
The Rationale behind this Program
The one silver bullet in solving the HIV/AIDS crisis is to strengthen women caregivers and they in turn will strengthen the community. These women, who care for HIV/AIDS patients and orphaned children, are critical to maintaining family structures in the community. However, they are themselves highly vulnerable to poverty and sickness. With the ability to generate income, they can support and empower themselves, while providing care that is essential in the community response to HIV/AIDS.
POL’s micro finance program provides women caregivers with small loans, business training, and business monitoring to start a small business. Businesses started with the loans are diverse and range from selling bananas along the roadside to brick-and-mortar stores selling cell phone chargers and accessories. Many women distribute fish to local restaurants, fry donut-like snacks for stores, or make their own floor wax. Additional businesses include: groceries (mille meal, rice, sugar, cooking oil, soap, vegetables, dried fish, dressed chicken, popcorn), used goods (clothes, shoes, handbags), hair salon/barber shop, electrical fittings, and knitted sweaters.
How the Program Works
Microfinance programs often face many challenges and obstacles to becoming sustainable and therefore case studies were carefully examined to identify the factors that increase a borrower’s chances for success. After in depth research, POL concluded that rigorous training and support in several areas are needed for long-term success. These areas are:
- Learning to work as a team
- Running a profitable business
- Becoming a responsible borrower
- Developing relationships of mutual support
POL’s microfinance program has four corresponding phases to train participants to be successful in these areas:
Team-Building: Traditionally microfinance projects fail because participants are not supported or motivated enough, and haven’t learned to be responsible for repaying loans and running a business. Team-building addresses this risk by creating a small network of committed borrowers. Participants learn to work in groups of four or five to support individual businesses. They become accountable to one another, motivated to work together towards a common goal and supportive of each other. They learn about each other personally and especially about the struggles in their lives. Participants meet weekly for several months and learn to identify how each person’s individual skills can benefit the team.
Business Skills Training: Typically, microfinance programs provide capital with little training. Power of Love is unique in that it provides mandatory, in-depth business skills training to all borrowers. It utilizes the One-Up Business Training program, a well-known and successful course in southern Africa, to teach participants how to develop and manage their businesses. A certified Head Trainer teaches five hands-on modules:
- Market Investigation
- Costing and Pricing
- Money Management
The training program guides the participants in the selection of their business and detailed analysis of their strategy. The program is designed for beginners, but it is rigorous. Extensive exercises are completed and monitored by the Head Trainer. Lectures complement the hands-on exercises. Loan recipients complete the training in groups of five, further developing their ability to work and learn as a team. Each module is a day-long session and training is completed in one week.
Loans and Repayment: Caregivers of children in POL’s pediatric HIV/AIDS care program receive a loan of Zambian Kwacha 500,000 (approximately US$125-130) to be repaid in 25 weeks with 10% simple interest. Payments are made weekly in the amount of 4% of the total repayment amount. In addition, each participant must save Kwacha 2000 per week to encourage savings behavior.
Each loan recipient has a passbook with her own record of loans, savings, and repayment. However, all records are also kept publicly, so that the women can track repayments for the entire group. Ample acknowledgment of success in repayment is used to motivate the women in their repayments. Continuous monitoring via field visits identifies challenges and group problem-solving addresses any difficulties that arise.
Ongoing Support and Training: Weekly meetings are mandatory and continue throughout all phases of the loan cycle to create a support and motivation network for the participants. As participants go through the program, needs for additional training and support may arise and will be addressed. Additional programs may include business mentoring, peer training, growing a business, and literacy.
Budget for the Micro Loans Program
Typical program costs are approximately $6.50 per loan per month. This includes identification of women, business training, weekly meetings, business mentorship meetings, and monitoring and support provided to businesses to ensure their success. With 170 women enrolled in the POL microfinance program, its total running costs would be approximately $14,000 for 12 months. A detailed and itemized cost of the total expenses can be provided upon request.
1. Provide an additional 100 new loans and business training to women in 2013.
2. Provide refresher training, business advice and monitoring via field visits to all 170 women and their businesses on the program at present.