MICROFINANCE – Banking the Unbankable
India has 800 million poor people who live on the brink of subsistence. This is one of the largest populations of poor in the world. The bottom 5% of India’s poor, considered “ultra poor”, face even deeper levels of chronic hunger, persistent poor health and illiteracy.
To cope with their vulnerability, the poor have no choice but to take loan for consumption and income generation from money lenders that charge exploitative rates of interest. This can put the poor in a debt trap. If poor people can access loans with fair interest rates, they could break out of the cycle of poverty. Bureaucracy, corruption, illiteracy and challenging logistics prevent the poor from accessing loans from banks and the government.
Our working Model
We provide support in granting small loans to poor people, primarily to women, who have no collateral and are marginalized. These women tend to use their income to benefit their households and children. The process is accomplished through :
• Recruits and trains responsible, appropriate borrowers, each of whom establishes her small business
• Helps them form groups that are accountable for each other’s loans
• Distributes funds for loans
• Meets with groups of borrowers to collect loan repayments and to guide their endeavors
Examples of enterprises established include, buying a buffalo to sell its milk; starting a kirana store; manufacturing sweets; selling soft drinks; grinding spices; sewing; candle making; collecting fallen hair for wigs and extensions; repairing watches; tea or petty shops; vegetable stands; bicycle repair; carpentry and welding shop or an auto rickshaw.
In groups of five to ten, the women support each other emotionally and financially by guaranteeing the repayment of each of their loans. With as little as INR 4,000, a borrower can start a kirana store. With INR 10,000, a borrower can purchase a milking cow / buffalo, sewing machine, or set up an embroidery unit. Many of the women become leaders in their communities and undertake projects that benefit all the residents.
The repayment of loans plus interest generates funds that can be reinvested as a second and third loan or used to start other women on their journey toward sustainable prosperity. The entire community benefits from improvement projects taken on by these newly confident and capable leaders.