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Microfinance in Zimbabwe
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.

Today’s Goals

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
Photo: Flickr

poverty in BangladeshLocated next to India and Myanmar, the South Asian country of Bangladesh has the eighth-highest population in the world. In Bangladesh, more than 20% of the population lives below the poverty line, surviving on less than $5 a day. Japanese clothing company UNIQLO, founded in 1949 and owned by the holding company Fast Retailing, is working to fight poverty in Bangladesh. UNIQLO is committed to the idea that creating and selling high-quality clothes can help create a sustainable society.

Social Business of Grameen UNIQLO in Bangladesh

In 2010, along with a microfinance organization called the Grameen Bank, Fast Retailing founded Grameen UNIQLO to solve health issues, unemployment and poverty in Bangladesh. Local factories that produce all goods for Grameen UNIQLO provide a safe and secure workplace that is not common in Bangladesh. The company educates partner companies on safe workplaces as well. The entire process of Grameen UNIQLO’s business, from producing and marketing to selling, takes place in the country. Moreover, all of Grameen UNIQLO’s revenue goes toward investing in local businesses, and the company distributes clothes for people in need due to poverty or natural disasters. Through creating jobs and reinvesting money for local business, Grameen UNIQLO has fought against poverty in Bangladesh.

Empowering Women to Be Independent

Grameen UNIQLO also focuses on empowering women and helping them be financially independent. Women traditionally tend to be financially dependent because of their limited opportunities in Bangladesh. The company provides job opportunities for women, who are referred to as the “Grameen Ladies.” These women get a low-interest loan from Grameen Bank to become financially independent, and they also work with UNIQLO to design clothes.

U.N. Educational Program for Women

The company also offers an educational program in collaboration with U.N. Women. In the program, female workers get training regarding workers’ rights, health and gender equality. The advanced training program for selected workers provides the class with the necessary skills for higher positions. The companies participating in this program believe that empowerment for women increases the competition and the overall quality of the community, helping to reduce poverty in Bangladesh. Importantly, Fast Retailing tries to gain a better understanding of the situation and the difficulties women face, so that it can address these issues more effectively.

$1 Million Scholarship Program

Fast Retailing launched a scholarship program at the Asian University for Women in Bangladesh to help students who struggle to afford higher education. In addition to the scholarship program, the company also provides an internship opportunity for students to work at Grameen UNIQLO and visit the company in Tokyo. These students can gain experience in marketing, market research and management during the internship program.

Grameen UNIQLO and Fast Retailing have made efforts to fight against poverty in Bangladesh through retail business. They have created job opportunities, a scholarship program, investments in local businesses and programs to help women to be financially independent. Grameen UNIQLO has developed a great model for other businesses to support local communities, fight poverty and help people develop self-sufficiency.

– Sayaka Ojima
Photo: Flickr

Making Nutrition Attainable
There are roughly 15.2 million children under the age of 5 in Bangladesh, according to the World Health Organization (WHO). Malnutrition affected about half of this population for years. However, there has been some success in lowering this amount by making nutrition attainable. The WHO records that growth stunting reduced from 41 percent in 2011 to 36 percent in 2014. The percentage of underweight children also dropped from 36 percent to 33 percent between 2011 and 2014.

Although Bangladesh’s economy has progressed and the country has experienced a reduction in poverty, food insecurity remains a concern for about 35 percent of its citizens. The International Food Policy Research Institute recommends that children who consume at least four different food groups a day will be 22 percent less likely to experience stunting. In spite of the food insecurity, each day there are more possibilities for making nutrition attainable for poor countries.

Processed Foods

A very common misconception among big companies and corporations is that poor countries would not be able to purchase their food. Therefore, many companies do not venture to sell to these countries in fear of failure. However, in countries like Bangladesh, India and Nigeria, people purchase over 80 percent of the food rather than relying on home-grown. In Bangladesh, 75 to 90 percent of low-income urban consumers and about 40 percent of low-income rural consumers purchase their food. Fifty to 70 percent of the food people purchase in these countries is processed.

Although there are many unhealthy packaged foods, there is also a market for nutritional processed goods. A study in Nepal found that 80 to 90 percent of the country’s children of 6 to 23 months of age ate commercially-produced packaged foods. In Nigeria, people buy 80 million MAGGI bouillon broth cubes every day. These bouillon cubes carry essential nutritional qualities such as iron and other key micronutrients. There is a need for more similarly packaged and processed foods that provide nutritional density and quality.

Making Nutrition Attainable

In an effort to improve the situation, Groupe Danone and Grameen Bank collaborated to make a fortified yogurt factory in Bangladesh. Danone is the world’s largest yogurt maker with more than $21 billion in annual sales. Muhammad Yunus, the Bangladeshi microfinance pioneer and founder of Grameen Bank, first suggested making baby food, however, a yogurt factory became the ultimate choice.

The company is successfully putting enough vitamin A, iron, zinc and iodine into the 60 and 80-gram cups of yogurt to meet 30 percent of a child’s daily needed diet. Overall, the local children who are often poor and malnourished benefit from the yogurts the factory produces. There is still a lot of work to do. The consumer demand increasing in the U.S. leads many businesses to cut sugar out of their products by at least 20 percent. However, for countries in Africa and Asia, there has yet to be this kind of motion.

The Danone and Grameen Factory Help People

The Danone and Grameen factory’s main goal is not to make large revenue, but rather to provide nutrition and education. Professor Muhammad Yunus of Grameen Bank hopes to share a lesson in manufacturing, business and humanitarian efforts for the developing world and the West. He believes that in starting this project, “You don’t see the money-making aspect, but how you can help people.” The project has employed the rural community through its links with the farmers which serve the factory. The yogurt company pays the local workers and farmers more than any customer does. Many employees are earning $60 a week, a substantial amount for rural Bangladesh.

Many private sector companies are hesitant to step into this effort because of the misinformation that affordable nutrition cannot be profitable. Professor Yunus hopes to educate these companies by challenging them to begin thinking about running their businesses in a different manner. For Danone, this project provides a clearer understanding of marketing food in South Asia and entering in a more profitable market in India.

The Impact

Danone and organizations like Feed the Future strive to make nutrition attainable in Bangladesh. As of January 2018, the U.S. Government selected Bangladesh as one of the 12 Feed the Future target countries. Feed the Future, under the U.S. Government Global Food Security Strategy, is a global hunger and food security initiative. It has established a strategy for making nutrition attainable. Feed the Future aims to intensify production while diversifying agriculture. It uses high-value, multi-nutrient products. Feed the Future’s target beneficiaries include rice farmers, the landless poor who are net purchasers of rice, small and medium-size farmers who can diversify production, agricultural-based enterprises and people employed in the fishing and aquaculture sector. In poor countries, companies such as Danone make nutrition attainable by placing more importance on those in need than on the profit it makes. Government organizations like Feed the Future also help in providing food security to poor countries like Bangladesh.

– Francisco Benitez
Photo: USAID

microfinancing in africaAt the turn of the 21st century, new ways of combatting poverty grew in popularity. Microfinancing, a system of banking created by Mohamed Yunus, offers small loans and financial services to those without access to traditional banking means, such as the extremely impoverished and those living in rural villages. Today, many organizations such as Grameen Bank offer microfinancing services across the world. According to The U.N. African Renewal project, most microfinancing clients are in Asia, but the African sector continues to grow. Microfinancing has the potential to transforms the lives of citizens without traditional banking services across the countries of Africa, but the overall effectiveness of this relatively new financial practice is still under hot debate.

The Bright Side of Microfinancing

To proponents of microfinancing practices, the new fiscal theory provides a fresh, grassroots fix to a deeply entrenched problem that requires new solutions. The Grameen Bank, founded by Yunus, still stands by the fiscal theories created by its founder. Microfinancing from Grameen bank is called “Grameencredit” and according to the bank itself, its aim is to help poor families overcome poverty by helping themselves. It is also targeted to help poor women. The premise of microfinancing operates on the idea that with more economic independence, at-risk individuals and communities can become more powerful and self-sufficient against problems such as corruption, poverty, and women’s rights issues. To proponents of microfinance, microfinancing in Africa will allow rural villages and impoverished people to gain economic independence, which will allow them to take advantage of education opportunities and health care services.

What Needs Work

Skepticism centers around a lack of concrete data and a distrust of anecdotal evidence. The U.N. finds that current data on microfinancing shows how it can be hard to measure how micro-finance affects poverty. Proponents of microfinance usually rely on case studies and anecdotal evidence. The same UN report also cited that some question the efficacy of microfinance because small businesses don’t contribute much to the economy’s productive capabilities or structural changes. Offering small loans to poor communities will do little to move the needle in terms of a countries gross domestic produce and it won’t address federal or state-level corruption. While offering microfinancing in Africa will help families on a case by case basis, the overall effects on regional or domestic economies have yet to show conclusive evidence of structural change beneficial to the poor.

Microfinance Today

To combat the shortcomings of microfinance, many institutions that give out micro-finance loans also offer other forms of aid and assistance. The Foundation for International Community Assistance (FINCA) has operated micro-finance operations since the 1980s and continues to do so today. Along with offering traditional banking services to the poor, FINCA also provides other services as well such as mobile banking. According to FINCA financial services are not always available in developing countries, but cellphones are becoming more common. Mobile banking services provide people in rural areas the opportunity to access banking services through FINCA that were previously unavailable. Along with mobile financing options, FINCA also operates banks with “POS [point of sale] terminals equipped with biometric recognition, otherwise known as fingerprint scans. These provide better security for clients accessing their FINCA accounts. Thus, modern technologies improve access to banking institutions while also ensuring secure transactions.

Along with offering baking services that require payment such as loans, FINCA also invests money into local markets in need of attention. FINCA also invests in energy, education and agriculture through FINCA Ventures in Africa. FINCA Ventures operates a specific type of investing called impact investing, where those receiving investment need to meet certain requirements set out by the investing institution. FINCA Ventures invests in startups with clear goals and plans to make a deep social impact and create a customer base using FINCA’s network. Those that FINCA invests in must offer a service that betters a community while also giving them access to FINCA’s banking and investing services. One such company is Amped Innovation, which offers affordable solar energy powered home systems and appliances. By augmenting microfinancing in Africa with other services, FINCA can affect larger systemic issues that traditional microfinancing ignores.

Microfinance Going Forward

FINCA, as well as other microfinance firms such as Grameen Bank, try to combat the shortcomings of microfinance by offering services and investments that aim at fixing systemic problems in impoverished communities such as infrastructure and banking security. Microfinance is still in its infancy and needs to find solutions to shortcomings of the past. With additional services and time to prove its worth, microfinancing in Africa will be an effective tool in the fight against poverty.

– Spencer Julian
Photo: Flickr

best_poverty_reduction_method_investment
As the G8 summit takes place, poverty reduction is going to be on the tip of everyone’s tongue.  With the final countdown of the Millennium Development Goals looming, everyone is working hard to raise awareness, spread ideas, and figure out new ways to reduce the number of impoverished people in the world.

History is full of individuals like John D. Rockefeller, who eventually turned to philanthropy as a way to fight against the root cause of poverty, and many today are equally aware of the need to fight the core cause of poverty rather than simply fighting the symptoms or outcomes. What they are finding is that good works alone will not eradicate poverty, and organizations like the Rockefeller Foundation are calling for a change. That change is a focus on investment. The goal is to combine philanthropy with profit and urge investors to think in terms of doing well by doing good.

The foundation has called their idea Impact Investing and has doubled its outlay to $2.2 billion in 2011. The concept will be a central idea at the G8 summit.  For a long time, investment was thought to simply be concerned with making a good financial return. Social and environmental goals were accomplished through donations to charities, and perhaps soft loans.  Financial gain did not belong in the world of charitable giving.  But financial growth from investments often bypasses the poor, as is the case in much of the booming India. Financial success has not translated into reducing numbers of malnourished children.

Impact Investing seeks to shift the thinking so that the poor are viewed as potential customers, not victims.  Maintaining ethics and avoiding abuse are key, but the Grameen Bank has helped millions get out of poverty using just such an approach. The bank is able to sustain its achievements by the return on investments it receives.  Growing number of investors are getting involved in Impact Investing, and both JP Morgan and Credit Suisse have estimated investments could reach $1 trillion by the end of decade.

The practice is in its early stages, but investments could just become the most effective poverty reduction method.

– Amanda Kloeppel
Source: The Telegraph