POVERTY: Malawi excesses

Malawi received £77.3 billion of aid from the UK in 2009. During the same year the president Mutharika spent 9 million on a private jet, £2 million on a wedding ceremony for his new bride and £3 million on 22 Mercedes limousines. Furious at these revelations, DFID officials reportedly cut the UK’s poverty aid to Malawi by £3 million, “the equivalent to the annual cost of the plane over the next 5 years”. The Common Public Accounts Committee has raised further concerns about £300 million of aid to Malawi since Mutharika came to power.
Corruption within African governments is no new phenomenon; neither is the “trade, not aid” paradigm. Yet, with 40% of the country still living beneath the national poverty line, it is key that Mutharika’s bad behaviour does not impair the opportunities of the country’s entrepreneurial population. Financial transparency is more essential now than ever.

http://themicroloanfoundation.wordpress.com/2010/08/24/pennies-for-life-putting-the-power-back-into-the-public%e2%80%99s-pockets/

POVERTY: Microloan Foundation spreads the wealth in rural Africa

August 16, 2010
Peter Ryan explains to David Woodward of Director magazine, why his Microloan Foundation is enabling inexperienced entrepreneurs to kickstart enterprise in sub-Saharan Africa

Enterprise can be an effective solution to poverty in rural Africa. But when the average villager gets by on only a few pennies a day, how does a business idea attract the capital it needs to get started? Without collateral, a leap of faith is required. It's Peter Ryan's job to supply that faith. Ryan runs the Microloan Foundation, a social enterprise that provides small loans and business mentoring to women in rural Malawi, Zambia and northern Namibia.

Ryan's entrepreneurial customers are inexperienced and often uneducated. To a conventional bank manager, they look a risky prospect. But out of the 50,000 sub-Saharan loans the Microloan Foundation will make this year, 99 per cent of the capital will be returned, plus interest.

The secret to Ryan's model is peer lending. The Foundation's loan managers gather small groups of like-minded women, providing microloans of around £70 to each member to start a business. The loans are "cross-guaranteed" by all the group members, who provide peer support should any of the women fall behind.

Like Grameen Bank, run by Nobel Peace Prize winner Muhammad Yunus, the Microloan Foundation doesn't provide any loans to men. "It's the women who manage the purse strings," explains Ryan. "They are the ones who have to put food on the table." It might seem strange to a European, adds Ryan, but gender-specific banking hasn't proved divisive. "The men are very happy that the women are being encouraged to go and earn money to support them," he says.

Ryan's aim is to kickstart rural economies. The Foundation's expansion into new regions is achieved through local loan managers, who develop relationships with village headmen before a Microloan branch is established. Groups of female entrepreneurs emerge naturally, says Ryan. Each group nominates a chairperson, a treasurer and a secretary. They are then taught the basics of accounting, finance and peer support and given bank accounts, before receiving their loans.

Interest is charged for two main reasons, explains Ryan. The first is to ensure that borrowers understand the price of money. Ryan's ultimate goal is to move his customers away from dependence on social enterprise and into the formal banking system. The second reason is to make the Microloan Foundation both sustainable and profitable. Profits are used to pay administrative staff at the Foundation's 20 branches and for expansion of the organisation. "We want to make a million loans a year across sub-Saharan Africa", he says.

Exporting capitalism to third-world communities requires sensitivity, no matter how good your intentions. Although the Foundation's record of repayment is good, there are other, more important measures of success to consider. "What you have to do is get your social mission right," says Ryan. "It's easy to say we get 99 per cent repayment, but if you're leaving a community in a worse state than they were before then that's not success. You don't want to drive people into the ground by eradicating the weak, you want to support the weak so that if it doesn't work for them they don't come out of the process slaughtered."

Ryan takes care to measure the social impact of the Foundation's work, tracking and monitoring the ways in which poverty is alleviated through enterprise. "You might call it TQM, but with a social mission," he says. But assessing progress can be a challenge when borrowers only deal in good news. "It's about communication. If you ask an African a question you'll get an answer. But is that really the true answer? It's a continual process of pealing away the onionskin," he says.

Ryan's success in Africa seems ripe for duplication in the UK. With an estimated 250 graduates chasing every available job, many are seeking start-up capital to fund their own ventures. But despite governmental pressure on banks to make more loans, many applications are unsuccessful. Ryan says microloans, backed by his Foundation's peer lending model, would reduce risk for lenders and help stimulate enterprise. "If people are brought together they can form a community of self-support," says Ryan. "Two to three hundred pounds is not a lot of money, but that would enable someone to get into painting and decorating, garden maintenance, something quite simple."

Simplicity is also the key to success in Africa, says Ryan. Most entrepreneurs start trading in areas they know well, "buying rice and beans and fish to sell at market." Some progress by opening teahouses at the side of the road, starting knitting and sewing businesses, buying livestock, or even setting up poultry operations.

The profits pay for secondary education, which in sub-Saharan Africa costs around £5 a term, much-needed medicine, home repairs and extra food. "Before these loans they might have one meal a day, afterwards they can have two to three meals a day," he says. "It's about improving quality of life."

http://wp.me/pQ0qm-3a

POVERTY: Microloan Foundation

Like many of the industrious women in the Chikondano Credit Group Funny Mbewe has enjoyed a lot of success in her retail business since the start of her first loan cycle with the MicroLoan Foundation.
Previously Funny and her husband, Emmanuel were workers on the local tobacco farm that surrounds their village, but this job could not provide them with a sustainable income. The local landowner paid them only annually and they lost out if the crop failed that year, regardless of how much work they had done. Funny and the rest of the workers were left to bear all of the risk of their employer’s financial endeavours; when we asked her about the relationship between the workers and the farm owner Funny replied “there is no relationship, only working”.
Because of this, Funny and Emmanuel need additional income. Emmanuel started riding a peddle-bike taxi - this is a physically demanding job and Emmanuel feels that, as he gets older, it will become a less and less viable way to feed his young family. Because of this the family has opened a grocery store, but with very little stock and no ability to expand, the family has found it difficult.
Since taking out the loan of MK10,000 (£43) Funny has been able to buy new stock and expand her business. Their Grocery is now the biggest in the area selling everything from food and stationary to pain medication. Emmanuel is in no doubt that, without the loan, the Grocery store would have had to close, as they would not have been able to grow it to a sustainable business.
While at the Chikondano Group meeting some women cannot attend because of a measles outbreak in the area. Sickness is a real problem in Malawi and can lead to people facing serious financial problems. This is why Microloan encourages people to save when they might not otherwise. Funny and the other women in her group often save more than the minimum amount recommended by the Microloan Foundation (with some saving double the recommendation). In this way the women are helping to guarantee their own financial security and that of their families.
Funny tells us that her husband is very encouraging of the loan. He is grateful that their business is improving and that he can scale back the physically stressful bike-taxi business. Funny is able to take a more active role in the business dealings of her family. Previously, like many women she knows, she had no input into the family’s financial welfare but microloan, by lending to women, gave her a role in her family’s financial success. Her Loan Officer Luciana tells us: “We are trying to empower women. It gives women more power in the relationship and the husbands are supportive because it helps the whole family”.

POVERTY: Why clients decide to leave MicroLoan Foundation MLF

Part of the piloting activity we’re doing is to look at why clients exit MicroLoan Foundation. The Branch Managers have been working hard, visiting clients’ homes and carrying out questionnaires looking at the client’s business and any problems she might have had, what she thinks of MicroLoan’s procedures (interest rates, repayment frequency, savings and so on), how the group functioned and what changes she would suggest making. I went out with the Central Regional Manager, Susan Kondowe, this week to do some follow-up unstructured interviews with a selection of the ladies who’ve already done the exit questionnaire. This allows us to compare the results from the questionnaires and the more informal interviews, to see if we’re really getting to the heart of the issues clients are facing. We’re pleased by the level of similarity between the two methods of data collection, which goes to show the Branch Managers are doing a great job. The types of reasons clients are giving for exiting are varied but include personal or family illness, having to focus on farming during the rainy season and disliking the repayment frequency of 2 weeks.
http://muzunguinkasungu.blogspot.com/2010/06/why-clients-decide-to-leave-mlf.html