Imagine a Zimbabwean woman trying to run a very small chicken farm amid the rising inflation of Zimbabwe’s unstable economy. Prices are constantly shifting, making it harder to buy the chickens and feed she needs to keep her business afloat. Her name is Nyachi and she is constantly struggling to stay ahead of the rocky economic situation in Zimbabwe.
Partners Thrive Microfinance and Whole Planet Foundation provided her with a loan of $50, equivalent to 500 Zim. Nyachi was able to buy more chickens and feed, allowing her to remain open for business. With the boost from the loan, she can pay back the money and even take out another loan. Thrive Microfinance also provides courses in business and economics, so Nyachi can be more prepared to handle the complex financing of being an independent entrepreneur. She is an example of how microfinance in Zimbabwe can change the country. Her story is just one of many featured on Whole Planet Foundation’s website, illustrating hard times for many small business owners as well as stories of hope.
The Situation in Zimbabwe
Zimbabwe is currently experiencing an economic crisis. Recent natural disasters, the COVID-19 pandemic and poor economic and financial leadership contribute to the country’s current situation. High inflation rates and the rapid devaluation of the Zimbabwean Dollar plunged the population into poverty and food insecurity. In 2015, The World Bank estimated that around 72% of Zimbabweans lived in poverty. In 2019, it was reported that 50% of Zimbabweans were food insecure and 49% were living in extreme poverty.
More and more women in Zimbabwe are taking on small-scale entrepreneurial roles. However, the male-dominated traditions make it difficult for women to get the loans needed to start and run a business. Without a bank account or the proper collateral for a loan, female entrepreneurs have a challenging road to success. These low-income businesses often struggle to profit since, without loans to start or expand a business, it is often impossible to procure necessary equipment and workers. In Zimbabwe, 52% of the population is female, yet women earn only 10% of the country’s income. This disparity is why most organizations for microfinance (MFIs) in Zimbabwe and worldwide cater specifically to women.
Simple Solution but Complicated History
Microfinancing is not an especially new concept, but its history is complex. In 1997, the wild success of Grameen Bank in Bangladesh sparked global attention. Unfortunately, many MFIs popping up in the wake of that success failed to improve or even worsened situations in their countries. Low-income borrowers in India and Nigeria were victims of MFIs with ultra-high interest rates and other issues that made paying them back difficult or near impossible, especially for those who were not financially literate.
Zimbabwe faced similar challenges when introducing MFIs into the economy and still struggles with some of those issues today. However, with more NGOs and nonprofits becoming involved in microfinance in Zimbabwe, interest rates and other predatory lenders are more scarce. Additionally, with organizations like Thrive working to teach financial literacy to aspiring entrepreneurs, the likelihood of borrowers being taken advantage of is much lower.
In 2018, the non-banking financial institution Thrive Microfinance partnered with Business Call to Action, an alliance bringing together multiple governments to address the need for low-income business owners to have the ability to engage in their country’s economics more fully. This alliance aims to provide loans and business management training to 16,500 women and girls in Zimbabwe.
The global nonprofit Kiva uses donated funds to finance small loans. Once a loan is repaid, donors can either withdraw their funds or recycle them back into the revolving lending system. Kiva is currently able to crowdsource an average of $2.5 million in renewable funds every week, making for a total of $1.4 billion in loans given to date. Their mission is a financially inclusive world where everyone is capable of improving their situation.
Programs like these lend more than money. The satisfaction of running a business, the empowerment that comes from education and the security of financial stability lend hope for the future, a loan that never has to be repaid.
– Kari Millstein