Inflammation and stories on Microfinance

Mobile BankingMicrofinance programs are a popular development tool that gives poor households loans and access to formal banking and other financial services so that they can generate income and market their enterprises. Others have questioned the true extent of the effectiveness of this bottom-up approach to development in actually reducing poverty in recent years. However, the rise in access to mobile banking in the developing world brings hope of a new generation of microfinance.

Microfinance as a Development and Poverty Reduction Policy

Mobile phones have been one of the fastest-growing devices in the developing world. International reports found that global mobile phone ownership is growing exponentially, especially among young people in emerging economies. Although ownership is higher in developed economies, a median of 45% of people in developing countries now owns a cell phone compared to only about 25% 10 years ago. The new groups of people with access to technology have created opportunities both for investors and the world’s poor.

Mobile banking accounts and transactions are now accessible in two-thirds of the developing world. Moreover, they are beginning to exceed the number of traditional banking methods in some regions. This growing market is not only multiplying the success of banks but also giving entrepreneurs new ways of selling and profiting from their labors. Through mobile banking services, customers are also gaining access to loans and insurance to protect themselves and their families if they become vulnerable to falling back into poverty.

Mobilizing Myanmar

Mobilizing Myanmar is a prime example of the impact of these new financial programs. A woman from Myanmar started this program to increase tech and communication access for women and the poor with the support of the Bill and Melinda Gates Foundation. She was inspired by having limited connections during her childhood in Myanmar. In 2013, the program noted that SIM cards cost over $2,000 USD and now, thanks to its hard work and partnerships with the Myanmar government, over half of the adult population has a cell phone. The successes of this approach to microloans and development has gained the attention of major international aid organizations due to its potential to boost people out of extreme poverty. This is because reports have indicated that users had better health outcomes, more financial stability and security and new sources of income.

Benefits of Mobile Banking

Mobile banking has also been more accessible for users who are illiterate as many apps are pictorial, especially those pertaining to farming. Agricultural productivity is yet another opportunity for mobile finance services to increase market access and demands. Mobilizing Myanmar also cites access to a phone and mobile money as an opportunity for online learning for children unable to attend school. It also presents new opportunities for women in the developing world as approximately 42% of women across the globe are not incorporated into the formal financial system. Mobile banking can help women gain control of their household finances. It has also proven effective as a means for group savings in parts of Myanmar.

While questions remain in many regions of access to a cell tower of even basic electricity to power cell phones in order to operate mobile banking, the cost of setting up these systems is a relatively low-cost investment. Also, once set up, these financial systems and microcosms, with regulations in place, can sustain themselves and reinvest in their communities. Thus, although mobile banking is by no means a perfect solution to lifting the world out of poverty, it has proven to be an effective development tool and a reliable investment. Mobile banking is just one way that modern technology can help the world’s poor lift themselves out of poverty.

Elizabeth Stankovits
Photo: Flickr

poverty reduction through microloans

Poverty reduction through microloans has been a successful strategy in many parts of sub-Saharan Africa. Between 2007 and 2016, Tanzania’s poverty rates have decreased from 34.4% to 26.8%. Consequently, microloans have become a necessity for low-income earners whose businesses are apart of informal sectors.

MYC4 is an online platform that helps individuals loan money to small enterprises in sub-Saharan Africa. Mads Kjaer, its chief executive, describes the importance of microcredit by stating how “people need access to capital to grow their informal and formal businesses that offer them a regular income and enable them to lead decent lives.”

As a result, governments now appreciate the impact of microfinance. They are encouraging investments by opening up the industry to foreign capital and improving policing mechanisms for customer protection. With micro and small enterprises making up approximately 32% of Tanzania’s GDP, microcredit strategies have played an essential role in reducing poverty through progressive business approaches.

New Microfinance Act in Tanzania

In 2018, the parliament of the United Republic of Tanzania passed a Microfinance Act that illustrates the framework under which microfinance institutions operate. The Act allows for enhanced regulation of the microfinance sector for the mainland of Tanzania and Zanzibar. But with only 16% of Tanzania’s population banked, 27% is financially excluded. Microfinance options and the accessibility of mobile money have expanded financial inclusion to nearly half of Tanzania’s population. For example, as of 2017, financial NGOs, mobile money and microloan providing institutions served 48.6% of the population.

Nonprofits that are Helping

Opportunity Tanzania, a nonprofit organization that provides loans, savings, and insurance to impoverished entrepreneurs, has helped over 3,625 clients in Dar Es Saalam. Its microfinancing services provide entrepreneurs and their families with a path out of poverty. Only 20% of Tanzania’s population has access to a formal bank within an hour’s walking distance of their home. Therefore, Opportunity Tanzania is now working to build a regulated bank that will offer clients savings products and provide them with a secure place to store their money.

The International Labour Organization [ILO], in collaboration with the UN joint program on Youth Employment, established a five-day training program for financial service providers to create outreach strategies that will educate youth on microfinance resources.

High population growth and substantial poverty are still present in Tanzania. However, the expansion of microloan services play a crucial role in supporting entrepreneurs and creating more job opportunities for youth. In short, poverty reduction through microloans is an important avenue for growth in Tanzania.

Erica Fealtman
Photo: Unsplash

Microfinance on Gender Inequality
Many women around the world struggle to stay afloat and support their families. However, the effects of microfinance on gender inequality are significant in that a loan could help women start businesses to financially support themselves.

The Story of Nicolasa

At the age of 4, Nicolasa’s mother died, leaving her in the care of her father and older sister. Though Nicolasa’s father did his best to provide for his daughters, they both had to abandon their education in order to keep the family afloat. Nicolasa and her sister worked on the streets of San Antonio Palopó, Guatemala selling a variety of food items.

As Nicolasa grew up and married, she vowed that her child would not live the same life as hers. She wanted to be present for her children, yet the only place she had worked was far from home. To care for her children both physically and financially, Nicolasa decided she would start her own weaving business from home. With no capital or collateral, and no banks to borrow from in her small town, Nicolasa faced an immense obstacle.

Microfinance

Nicolasa’s problem is one that many women in Guatemala and other developing nations face every day. Guatemalan women want to become financially independent but often have nowhere to obtain even a small loan. Without the aid of a financial institution, these women have minimal opportunity to start a business, make small investments or simply support their families.

In 1976, Muhammad Yunus recognized the difficulties these women face and started the first modern run microfinancing bank. His goal was to lend small amounts to those in developing countries who did not have access to banks or had little collateral to support their endeavors. A microloan as small as $60 could now go to a woman opening a fruit stand, for example. Microloans may not cover large purchases, but just a small amount of money can go a long way for women in developing nations. A successful loan may help a woman jump-start her business and become financially independent. Therefore, the effect of microfinance on gender inequality could be very significant.

The Effect of Microfinance on Gender Inequality

Studies have proven microfinance to be a great tool for economic development and the promotion of gender equality. When women are financially independent, they often meet with greater decision making power within their households. Gender equality within households often results in women taking a more prominent stance on societal issues, which in turn, further promotes equality around the world.

Gender equality can also create a healthier and more robust global economy. A study that the McKinsey Global Institute conducted claims that if each country had equal opportunity for women, the global GDP would increase by $28 trillion, or 26% by 2025. From individual households to the global economy, gender equality results in a healthier balance of power across developing nations.

Criticism

Not everyone agrees with the impact that microfinance could have on gender equality. Many critics claim that a country’s cultural disapproval of women who work can minimize the positive effects of microfinance and prevent women from obtaining microloans. To combat these cultural norms and their negative effects on gender equality, many microfinance banks offer loans to women who are hoping to start a business from home. Nicolasa is one of these women.

Nicolasa Now

Nicolasa obtained a loan of $400 from the Foundation for International Community Assistance. She used the money to buy a loom, from which her success was significant enough to seek investment for a second loom. She currently weaves fabric and rents out her other loom to women from her village. Nicolasa is now proudly saving to send her daughter to college.

Nicolasa is one of many women in developing countries experiencing the positive effects of microfinance. She has provided herself with a sustainable income and is giving her daughter the wonderful gifts of higher education and financial support. If one small loan can change a woman’s life for the better, it is easy to see how microfinance is providing the same benefits to women across the world.

– Aiden Farr
Photo: Flickr

 

Microfinance poverty reduction
Commercial banks often find themselves unable to provide financial services in rural areas. Poor credit histories, limited manpower, customers illiteracy and accommodation problems of the staff limit commercial bank operation. Microfinance is a simplistic tool to remedy this issue. It is the provision of small loans to the impoverished to help those who otherwise do not have access to traditional banking services to engage in or establish an income-generating activity. Microfinance has been a renowned initiative for poverty reduction as well as economic and social development for over 30 years.

Microfinance Models

The concept for microfinance was propounded by Mohammad Yunus, who subsequently founded the Grameen Bank in Bangladesh to provide credit facilities to the poor and boost their entrepreneurial potential. Since then, microfinance has taken a range of forms.

These forms include non-governmental organizations, credit unions, cooperatives, associations, community banking, Self Help Groups, ROSCAs, small businesses and village banking models.

The Dark Side of Microfinance

In terms of poverty reduction, two key questions have emerged: first, to what extent has microfinance contributed to creating a long-lasting and permanent difference to help households escape poverty? Second, to what extent do microfinance programs reach the worst off, “chronic poor” and not just the “transient poor.”

The total number of microcredit borrowers has magnified exponentially from less than 20 million in the 1970s to over 211 million in 2013. There are undeniable success stories regarding the transformative effect of microfinance on individuals and households. But until recently, there has been very little research that shows the impact of microfinance in a way that demonstrates causality.

In their book “Finance Against Poverty” (1996), David Hulme and Paul Mosley were first to criticize microfinance. They suggested that microfinance helps those above the poverty line more than those below the poverty line. In some instances, they found that microcredit makes life for those at the base of the pyramid even worse. Some argue microfinance contributes to creating debt traps for the poor whereby they sink into the vicious cycle of repayment of loans, and due to increasing interest rates, they are never able to escape.

An unprecedented consequence of microfinancing is the increase in organ trafficking, especially in Bangladesh. When borrowers are unable to repay their debt, traffickers pressure them into selling their organs. In most cases, these borrowers are uneducated about the implications of their actions. In other cases, debtors go as far as to take their own lives.

The Silver Lining

However, despite its shortcomings, microfinance has hardly been a failure in the case of poverty reduction. Rather than seeing it as a poverty panacea, microfinancing is more aptly a means of expanding opportunities for the disadvantaged.

Perhaps one of the most significant advantages of microfinancing is empowerment. Empowerment is at the center of human progress. Microfinance is helping the world reach the first Millennium Development Goal: eradicating poverty and hunger. It is also helping reach the MGD 3 to promote gender equality and empower women.

For example, Self Help Groups are a popular microfinance model in India, particularly among rural women. These groups provide a platform to act on a variety of social issues such as health, nutrition, domestic violence, etc. During the pandemic, the SHGs were incredibly useful in distributing masks and sanitizer to meet shortages and running community kitchens.

Financial Diaries of people living on $2 or less per day have shown that microcredit helps many families make critical purchases that they could not otherwise afford during times of scarcity.

No single aspect of development, be it microfinance, health or education, can work towards poverty reduction. The amalgamation of all different facets, when targeted to the poor at the grassroots level, is a powerful tool in the fight against poverty and puts the world on the path to an egalitarian society.

Riddhi Bhattacharya
Photo: Wikimedia Commons

Known for its tropical vistas and banana plantations, Costa Rica has also developed a well-deserved reputation for stability. Indeed, since abolishing its military in 1949, the small Central American nation has celebrated seven decades of uninterrupted democracy. While this stability has allowed Costa Rica to make great strides in alleviating poverty, however, nearly 21 percent of the country still remains impoverished. To this end, many in Costa Rica are increasingly turning to microfinance as a potential remedy.

Why Microfinance?

Microfinance is a banking service that focuses on delivering small loans to communities underserved by traditional banks. These ‘microloans’ can be as low as $100 and are specifically designed to help meet the needs of low-income families.

Because the principal of a microloan is much smaller than that of a traditional loan, lenders can afford to take on risks they otherwise could not. This means less stringent requirements on things like documentation and property, which are traditionally the largest obstacles to acquiring credit for those living in poverty. As a result, microfinance has become a favorite tool of activists in the developing world.

Costa Rica is no exception in that regard. With more than half of Costa Ricans unable to raise needed funds in an emergency, microfinanciers provide the country a crucial service.

Keeping Small Farmers and Rural Communities Afloat

One reason microfinance has been able to take off so quickly in Costa Rica lies in the country’s history. In the 1980s, a prolonged economic crisis prompted traditional banks to retreat en masse from Costa Rica’s rural areas. This left many small farmers suddenly lacking access to badly needed credit.

To help combat this issue, organizations like FINCA began seeking ways to encourage sustainability in rural financial markets. One such solution was microfinance.

Beginning in 1984, FINCA Costa Rica set about building a series of ‘village banks’ in the areas hit hardest by the loss of financial services. These were largely community-run, shared-liability ventures whose purpose would be to offer microloans to farmers. It did not take long for the model to become a success. Village banks quickly began to attract Costa Rican farmers, many of whom would have had difficulty acquiring a standard loan. In fact, the village banks would prove so popular that within a decade they had already become self-sustaining.

Others in Costa Rica soon took note of FINCA’s success. Though not all would copy the village bank model, many other microfinancing operations began to sprout up around the country.

Empowering Costa Rican Women

While FINCA’s village banks primarily served a demographic consisting of rural, male farmers, modern microfinanciers pursue a more diverse client base. Women in particular are a focus for many.

Research demonstrates a sharp gap in financial access along gender lines in Costa Rica. Thirty-nine percent of Costa Rican women lack a bank account, for instance, compared to 25 percent of men. This is a pattern that largely holds consistent across the developing world. Although in many cases women provide necessary income for their families, they often lack the means to build upon those earnings. This leaves them more vulnerable to the sudden economic shocks that can devastate a household, like personal medical emergencies and unexpected changes in consumer trends.

Microfinance institutions empower these women, however, by offering them the credit needed to start a business of their own, and by providing them with a newfound resiliency.

Thanks to the efforts of organizations like Fundación Mujer, women now own more than 22 percent of Costa Rican businesses. And, as the number of women gaining access to loans and other financial services increases, that percentage is only expected to grow. This means greater social mobility for Costa Rican women and a stronger ability to weather the storm in times of crisis.

The Future of Microfinance in Costa Rica

Microfinance in Costa Rica has come a long way from its first experiments with village banks in the 1980s. As it stands, Costa Rica is now one of the world’s largest microfinance markets. And, with the industry expected to grow by a further 5-10 percent in Latin America over the next decade, it is unlikely that will change any time soon.

While experts caution that microfinance cannot be seen as a ‘miracle cure’ for poverty, it is undeniable that it can provide real benefits to those in need. To see that, one only has to consider the success of microfinance in Costa Rica.

– James Roark

Photo: Pixabay.com

Microlending Organizations
In the fight against global poverty, one hot-button issue is how to provide aid without the implication of paternalism, the idea that one person or group knows the interests of another group better than that group knows its own interests. Tariq Fancy, the founder of the nonprofit The Rumie Initiative, recalls hearing a Kenyan relative’s view on problems with international aid, saying “don’t walk in assuming that from your perch in North America you figured out all the answers for Africa.” Putting resources and power in the hands of communities both provides aid and acknowledges that they can make decisions about local interests. Microlending organizations have the power to do just that

Microloans are small loans at low-interest rates. Individuals living in poverty often have difficulty securing loans from traditional financial institutions due to a lack of borrowing history and assets to use as collateral. Even when people can get loans, interest rates are often high. People often use microloans to finance small businesses in their early stages, enabling people to overcome barriers and progress toward lifting themselves and their families out of poverty.

Microlending organizations can also issue loans for community projects, like building wells or funding schools. Microlending organizations typically, but not always, issue loans funded by individuals rather than by banks or other financial institutions. Here are four companies and organizations that use microlending in different forms to empower people living in poverty.

Four Microlending Organizations that Empower the Poor

  1. Kiva: Kiva crowdfunds loans from people around the world and uses partners to issue them. The nonprofit has enabled the funding of more than $1.33 billion in loans. Kiva emerged in 2005 and has partnerships with financial institutions throughout the world, where it transfers the crowdfunded money. The local field partners then loan money to Kiva’s lenders. Kiva has a 96.8 percent repayment rate and operates in 78 countries. On Kiva’s website, lenders can sort loans by region or category, such as agriculture, women and eco-friendly.
  2. Zidisha: Zidisha is the first direct person-to-person microlending service that focuses on entrepreneurs and job creation. Its name” comes from the Swahili word meaning “grow.” Unlike Kiva, Zidisha does not loan through financial institutions but facilitates direct lending between people. Zidisha’s loans total more than $16 million and have financed more than 240,000 projects.
  3. Building Resources Across Communities: Building Resources Across Communities (BRAC) is the largest non-governmental development organization in the world in terms of number of employees. Hasan founded BRAC in 1972 and it employs more than 120,000 people in 11 countries. BRAC has a microfinance program, primarily in Bangladesh, which has loaned to 5.6 million borrowers, 87 percent of whom are women. Unlike Kiva and Zidisha, which operate person-to-person lending services, BRAC distributes loans to lenders on its own using donations and other funds. BRAC also does work unrelated to microfinance, investing in schools and in water, hygiene and sanitation services.
  4. Women’s Microfinance Initiative (WMI): Women’s Microfinance Initiative (WMI) began issuing loans in 2008 and trains local women in managing loan hubs. WMI has loaned more than $4.5 million to rural women in amounts of $100 to $250 at an interest rate of 10 percent. According to WMI, 99 percent of its borrowers report doubling their income within six months of being involved in the program. WMI reports a 98 percent repayment rate.

The efficacy of microlending in pulling people out of poverty is up for debate, but some cases have shown promising results. A microfinance program in Uzbekistan resulted in 71 percent of participants reporting an increase in food intake quality. One study showed that when a microfinance program was put in place, there was an 18 percent decline in extreme poverty. While different studies report differing results, microlending organizations like Kiva, Zidisha, BRAC and WMI have certainly been a success.

– Meredith Charney
Photo: Flickr

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The continent of Africa has experienced exponential growth in the last few decades, which has attracted attention and investment from several multinational firms and corporations. International corporations such as Facebook and Google have then concentrated on accessing this booming market of newly prosperous consumers. The World Economic Forum has recorded the astronomical growth of African markets and outlined a very optimistic economic trajectory for many of its developing nations.

Growth and Debt

The Forum’s findings revealed that the “continent demonstrated an average real annual GDP growth of 5.4 percent between 2000 and 2010, adding $78 billion annually to GDP. Growth continued at 3.3 percent from 2010 to 2015.” A major reason why Africa experienced these high levels of growth is the recent influx of microfinance institutions providing affordable loans to farmers across the continent.

Farming is the primary source of food and income for Africans and provides up to 60 percent of all jobs on the continent.  Microfinance institutions have tailored their lending to this fact and the results have been extremely beneficial for both the farmers and firms themselves.

The loans give African farmers the opportunity to invest in profit-generating activities that improve their economic security and access the most important benefits of microfinance institutions in Africa. Activities such as providing better food for their families, improving access to clean drinking water and sanitation, and enrolling their students in school instead of work have all driven the impressive growth rates on the African continent.

Benefits of Microfinance Institutions in Africa

The benefits of microfinance institutions in Africa also extend to the lenders and their companies. The microfinance industry in Africa currently has a gross loan portfolio of $8.5 billion and attracts a consumer base of 8 million people. According to Mix Market microfinance institutions’ data, the African continent has developed one of the fastest-growing MFI bases.

This gross loan portfolio and base of African microfinance institutions continue to grow and has witnessed an exponential growth of 1,312 percent between 2002 and 2014. The farmers themselves have excellent repayment rates despite the daily hardships they face, which continues to foster growth in the African microfinance industry.

The mutually beneficial partnership between these microfinance institutions and African farmers and the continuing innovation from both sides has helped foster growth in several African countries. In fact, a perfect example of such interaction and progress can be found in the nation of Mali.

Mali

In Mali, microfinance institutions began offering an innovative loan product tailored to farmers’ seasonal cash flow. The results of this new product were outstanding for both the firms and the farmers.

The households offered these loans saw an increase in investment on agricultural inputs such as fertilizer, herbicides and insecticides; this led to an increased value of agricultural output by $32 and value of livestock by $168. The repayment rate among those that took out loans was perfect, which ensured profits for the lending institutions as well.

Room for Improvement

While microfinancing has been an overall beneficial lending practice, there are still some challenges to overcome. The predominant issue that needs to be addressed is increasing access to rural communities. Some 70 percent of the population in Sub-Saharan Africa lives in rural areas, where financial services are scarce.

This issue is compounded by the areas’ lack of infrastructure to help microfinance institutions reach them. Microfinance institutions must continue to expand their operations in Africa in order to maximize its benefits and keep Africa on its current growth trajectory.

– Anand Tayal
Photo: Flickr

Essential Financial Tools for Small and Medium Scale Businesses
Businesses drive the economic and overall growth of a country, and strong and thriving businesses generate income, employment opportunities and support families. In fact, these groups constitute the core of a nation’s socio-economic development.

In a developing country, this valuable contribution is made predominantly by small and medium scale businesses. Experts agree there are two essential financial tools for small and medium scale businesses in a developing economy:

  1. Micro-loans
  2. Insurance

Together these two financial tools can bolster the steady growth of a business and insulate it against unforeseen circumstances such as bad weather and unfavorable market conditions.

Micro-Loans

Micro-loans are a fundamental tool for small and medium scale businesses. Micro-loans are small amounts of money borrowed from a bank or a financial institution which can be returned in minuscule monthly installments over a few years. Depending upon the borrower’s income, the installments can be as low as a few cents a month.

Often, there are no additional charges involved. “I’ve worked in microfinance long enough to know that late fees create a cycle of debt,” says Matt Flannery, founder and CEO of Branch, a mobile lending platform that remotely transfers money ranging from $2 to $500 to bank accounts of poor small-scale entrepreneurs in Kenya. Like Branch, many other startups in the developed world are contributing to the success of mushrooming small and medium scale enterprises in developing nations around the world.

The significance of these financial tools for small and medium scale businesses has been reinforced through various initiatives of the World Bank as well. In Turkey, a World Bank project helped expand the export capacity of small and medium scale businesses through micro-loans worth $1.7 billion in Export Finance Intermediation Loans. The project report showed that participating companies introduced new products, increased exports and benefitted sales and employment significantly.

Insurance

The second among the financial tools for small and medium scale businesses is insurance. Insurance creates a safety net for a businesses, and in case a business isn’t as successful as initially perceived, insurance can be used to pay off debt. Insurance thus provides an opportunity for the entrepreneur to avoid the vicious cycle of poverty, and is also proven to encourage risk-taking and improve business competitiveness.

A recent report published by the World Economic Forum stated that one in three people in Latin America lives in an area threatened by frequent floods and climate change. In countries like Mexico, Puerto Rico, Peru and Guatemala, insurance is the most effective financial tool for small and medium scale businesses.

Success vs. Failure

Public-private partnerships in many Caribbean countries provide risk cover against earthquakes, hurricanes and other natural disasters. Recently the World Bank issued sustainable development bonds to Chile, Columbia, Mexico and Peru to provide comprehensive insurance covers worth $1.36 billion against earthquakes.

These two financial tools can mean the difference between success and failure for many businesses. Increasing access to micro-loans and insurance in developing countries can help businesses grow and expand, resulting in many more people being lifted out of poverty.

– Himja Sethi
Photo: Flickr

credit access in the central African republicSince its independence from France in 1960, the Central African Republic (CAR) has faced adversity in growing its economy. While poverty plays a significant role in the region’s struggles to achieve food security, safe sanitation and shelter, a lack of credit access in the Central African Republic is another main contributor.

Obstacles to Credit Access in the Central African Republic

Making Finance Work for Africa (MFW4A) states that the weaknesses in the CAR’s financial sector have held back its economy, as it contributes only 17.6 percent to the country’s GDP. The inadequacy of services also makes it difficult for people to access loans or other banking services that could be helpful in their businesses or personal lives. To help the CAR’s citizens improve their quality of life, increased credit access in the Central African Republic is crucial.

CAR’s financial services have been relatively stable, but the sector is considered fragile due to deficient bank loan portfolios and inactive loans, known as non-performing loans (NPLs), which account for 30 percent of all loans in the CAR. The sector also has an above average percentage of loans to the public sector, making it vulnerable to losses due to government instability.

To help address these issues, the International Monetary Fund approved a disbursement of $40.2 million and an augmentation of $55.1 million to the CAR in 2017 as part of the Extended Credit Facility Arrangement. The funds will be used to support economic growth and develop the banking sector. According to Deputy Managing Director and Acting Chair Mitsuhiro Furusawa, the CAR’s program consists of “improving regional institutions, stricter monetary policies, removal of statutory advances, sound bank regulation and supervision, and firm controls over the extension of credit to banks.”

Bringing Credit to Individuals in the CAR

A more direct way of aiding impoverished families is through the Mercy Corps project Microfinance in the CAR, which launched in 2010. The project’s mission is to produce, educate and assist 169 Village Saving and Loan Associations (VSLA). The project was also created to assist in constructing supervision strategies, insurance funds and credit policies. The project’s answer to the CAR’s issues is to educate the VSLA groups to practice saving and credit strategies during the members’ first nine-month loan and savings cycle. Its long-term goal is to help 3,300 households by expanding the groups’ assets in developing and overseeing independent businesses to gross earnings.

In recent years, credit access in the CAR has been made possible through a microfinance program established by the U.N. Development Programme (UNDP) for entrepreneurs developing businesses. The UNDP opened a saving bank called Gogoro that gives users the opportunity to save money securely. Severin Saragourne, an entrepreneur and a user of Gogoro, said, “If you borrow wisely and respect the deadline for your program, you’ll have no problem paying the money back.” The micro-credit program has saved many people from poverty and starvation in the CAR. Through Gogoro, more than 49,000 people in underdeveloped nations have received access to credit, savings and other financial services to overcome poverty.

Another sign of progress in financial services is the UNDP’s project with the Leaders of the International Centre of Credit Unions, which made magnetic cards available for all transactions in 2011. Even with the obstacles the CAR has struggled with, the region shows promise in improving its financial sector and resolving the limitations of credit access in the Central African Republic.

– Christopher Shipman

Photo: Flickr

Credit Access in Iraq
There is a plethora of obstacles to overcome when examining the aspects of financial stability in the Middle East, and Iraq in particular. Iraq has an institution called CHF Vitas Iraq geared towards restoring the economy and producing monetary growth in the nation.

Forming a Solid Foundation

“In Iraq, for example, only 11 percent of adults hold an account at a formal financial institution.” CHF Vitas Iraq is doing a tremendous job of, “offering financial services to families and the owners of micro and small businesses, and by supporting homeowners in home improvement and restoration.”

This type of commitment can not only better the lives of the individuals receiving credit access in Iraq, but can also provide the groundwork for an ever-changing economy in the future.

The work CHF Vitas Iraq has invested into the community is incredible. The organization continues to promote and support small businesses as well as supply aid to the region. “They are a subsidiary of Global Communities, which is a non-profit development organization that partners with local stakeholders across a range of topic areas.”

Micro-financing Changing Iraq’s Landscape

In fact, “since its inception, CHF Vitas Iraq has become the largest microfinance institution in Iraq with the largest market share, disbursed more than $1 billion in loan capital, grown an outstanding portfolio of more than $74 million (as of August 2017) and maintained a 98 percent on-time repayment record.”

With the assistance provided by this group, citizens are becoming increasingly stable and proud of themselves as they now have both the purpose and ability to follow their dreams. Aid and assistance comes at a great time for Iraq since they have been experiencing much conflict over the past several years.

The Overseas Private Investment Corporation is working to issue relief in the areas of Iraq that are dealing with the most conflict.

Positive Results of Credit Access in Iraq

There was a survey implemented in the region that represented credit access in Iraq for the population, and “the survey revealed a significant gap between Iraqi citizens who borrowed formally (4 percent) and those who did so informally (65 percent).”

When one notices the impact credit has on people’s lives, it allows a better understanding of how difficult it is to live without access to such a resource. Many Middle Eastern countries do not have a well-developed financial system, so with the ability for these loan companies to provide credit access in Iraq for a majority of the citizens, there can only be positive results on the monetary factors of the economy.

There is still much that needs to be accomplished for this country to become more stable in an economic aspect as well as maintain strength to persevere during conflict. But, if ISIS can be controlled and micro-finance loans can continue to be distributed in a proper manner, then credit access in Iraq will produce many opportunities for the citizens and hopefully lead to a stronger economic system.

– Matthew McGee

Photo: Wikimedia Commons