Too Mutch

...a safe place to dance with ideas, play with theology, and re-create a life implicated by God

Monday, April 23, 2007


While there are a lot of questions to engage with here (and I'm having a hard time finding space in life to get to them all), it seems prudent to give those who are connecting to the medium the basic gist on micro-finance. Our support letter mentions that we are going to spend a day (or perhaps a couple) getting more familiar with the micro-finance projects and initiatives in Burundi. Why? Mars Hill has committed to resourcing micro-finance in Burundi in hopes of helping the most economically challenged people in a country with a struggling (that doesn't quite say it) economy. Micro-finance is a promising future for many. Keeping in mind that I am not an economist or an expert on this, here is how it works...

Imagine that you are a woman in your 30's with three children of your own. Several years ago you became a widow when your husband was killed in an ethnic clash that took the lives of hundreds of thousands of men and women. Your household has swelled to include 3 more, who are the children of your sister. You have lost her and her husband to AIDS. You are doing all you can to faithfully serve and raise this family. Some days there is just enough food for everyone. Other days, some go without. Education? Only a dream that must take back seat to breathing and drinking.

But you are blessed with a skill--you are a gifted weaver of baskets, purses, etc. You work fevereshly everyday, but you can't get ahead. Because you have no capital, you have to borrow money from the man who provides your materials. He charges you high interest and requires that you sell almost all of your products back to him for a price he sets. You hover somehwere between "barely scraping by" and "I'm ready to give up."

Do you have any idea what it takes to help a woman in this situation begin to make a sustainable living? A sustainable life looks something like this...

*Enough food to meet the needs of the entire family

*A proper shelter/home where they are protected from the elements, which helps them stay healthy and strong and less likely to develop illnesses that for many are life-threatening.

*It enables you to send some or all of your children to school, the linchpin to a more sustainable future.

Again, what do you think it costs? If you are like me, you'd have guessed the figure to be reasonable, but still in the hundreds or low thousands. While figures vary depending on the country and need, MANY women like the one I've described can get out from under the oppression of the loanshark and into generating a sustainable income for between $1-$40. I know that sounds ludicrous, but story after story will confirm it. Here's generally how it works, understanding that it has a different setup and expression in different parts of the world.

A small group of women will be gathered in a town or village. Their group will be oriented to the philosophy and rules of this lending method. They will function as a communal recepient of the help, meaning that their individual success is tied to the success of each of the others in the group. Each will apply for a loan, usually smaller loans for first time borrowers. Upon receipt of the money, they will put it to work and begin paying it back weekly at little or no interest. You will pay each week by gathering with your team and a representative from the lending organization. In this way you are held accountable and resourced all at the same time. If you have a difficult week, your team must cover you. And you cover them when needed.

Having this small loan means that you can buy materials at a competitive cost, rather than being taken advantage of by a swindling loanshark. You've been empowered. The playing field has been ever so slighly leveled. You are also able to set a reasonable price for your goods and participate in the local and nearby markets. Over the next several months, you have paid back your loan in full while also being able to provide proper food and shelter for your family, who is now healthier than they have ever been. There is talk of sending your oldest son and daughter to school next year. In the next several months, you have taken a second loan to expand your business and you now employ three other women and are able to pay them a sustainable wage so that they can provide for their families.

And the story goes on. Small loans leading to a bright future. Does it really work? Yes, unbelievably well. But won't the poor just take the money and run? It doesn't happen. The repayment rates, especially with women, are in the 90-95% rate. Those that don't pay back are often the subject of some catastrophe (natural or otherwise) that makes it impossible for them to pay back the loan. Why women, you ask? Research and experience have shown that women funnel the benefits to their children and families. Men often do not have the same track record, but progress is being made in that dimension too.

When the $40 loan gets paid back, it gets redistributed to others--not dropped into someone's deep pockets. The money keeps getting put into action where it can help desperate families lose the title of "desperate." Can you think of any better way to spend $40? It goes a long way...and with great impact. Micro-finance isn't so "micro" after all. And it is changing the shape of economies and people's lives all over the world.

If you want to read how Micro-finance got its start, you can read Nobel Peace Prize-winning Mohammud Yunus's book Banker to the Poor. Yes, it's an Oprah selection!!!

NOTE--PLEASE go into the comments section and read Jason's (aka wicked smaht guy) comment/clarification on micro-finance organizations. This is why we are going as a team!


At 7:05 PM, Anonymous Anonymous said...

Hey Greg thanks for the info on the micro finance. That's an amazing story and will help me share what you will be doing with family and friends. love you, mom

At 8:12 PM, Blogger Jason said...

Thanks, Greg, for the great overview! One correction, however: Microcredit programs do charge interest – usually a relatively high rate of interest. Traditional charities use a significant percentage of donations to finance overhead costs, leaving only a small percentage to be used for the actual humanitarian work. The interest earned in microcredit is essential for sustaining the operating costs of the microcredit organization. Microcredit organizations need to continue to grow, if only to be able to supply larger loans to successful entrepreneurs, and the interest earned makes a microcredit organization self-sustaining. It is also used to finance education about business strategies, nutrition and health-related concerns, and other non-financial information that is crucial to the long-term health of borrowers and their communities.

One of the most attractive aspects of microcredit is the recycling of a given contribution, and the huge returns on investment for developing countries. One rule of thumb for the size of the loan necessary to make a substantial difference is the use of the average per capita income for an economy. So, for Burundi, a loan of around $100 is necessary, while in Russia a loan of around $4500 would be necessary to provide the capital to change a life. That leaves a simple equation to figure out where your charity donation has the most impact. But the impact of a donation to microcredit doesn’t end there, with a donation that must be repeated to maintain impact (as it would with a traditional charity).

With microcredit, the typical repayment period is about 6 months, barring any significant personal or natural disaster. After six months the loan is completely paid back – and it is lent to another person. Extrapolate that over ten years, and you have the same $100 being loaned to at least 20 borrowers. Beyond that, the average family size is at least five people, so more than 100 people are raised, usually permanently, out of destitution! For $1.00 per person? Really? Yep, as unbelievable as that sounds. And the repayment rate is usually near to, or above 98%. The loans often incorporate other financial services.

Microcredit institutions now often offer insurance, personal savings, and many other benefits that provide safeguards against catastrophes that typically devastate personal lives and economies. Where before a “safety net” consisted of an extra pig to be raised for the following year, borrowers now have access to safe savings accounts.

Greg mentioned Yunus’ book Banker to the Poor. Another fantastic resource is A Billion Bootstraps by Phil Smith and Eric Thurman.

At 8:34 PM, Blogger Greg said...

Jason, thanks for this. A HUGE reason why we are joining as a team. I should have had you write this post!! I will edit my front page to direct people to read your comments. see you tomorrow.

At 8:24 AM, Blogger Bob Thomas said...


I enjoyed your Blog. My family and I are planning to serve in Burundi for a 3 year Assignment. I Pastored in Cadillac, Michigan for a number of years.


At 10:51 AM, Blogger Greg said...


I am continually surprised by the people who "show up" at a blog! Thx for the comment. If you can speak into our trip at all, please do. I'd love to hear more about your going to Burundi and the journey towards that decision. Drop me an email if you get time

At 8:05 PM, Anonymous natedog said...

this is pretty cool. I like this alot. It sounds promising.

At 10:01 AM, Blogger Dan Brose said...

Greetings again from Burundi. You're having a great discussion on microfinance, and we're looking forward to continuing the discussion when you come in just a few weeks! Our microfinance institution in Burundi is called "Turame Community Bank" and though we don't yet have a web page, you can visit the website of our sister microfinance institution in Rwanda (Urwego Community Banking) at Though "Turame" is younger and less advanced than "Urwego", the information that you'll find on the website is consistent with all that you'll find in Burundi. See you soon, Dan.

At 11:09 PM, Blogger Greg said...

thx for this resource dan. I'll email our team and we'll check it out. Just spent the day in at a CCDA conference held at Mars Hill, with a breakout session on Microfinance led by David Larson of Hope International. Trying to soak in as much as possible! The time is drawing near. 6 weeks or so! Just booked our tickets this week.

At 5:46 AM, Blogger Mzungukazi said...

This comment has been removed by the author.

At 4:39 AM, Blogger trina said...

trina chase here- working with WR in Burundi. Can't wait for you guys to come out! We are excied about your enthusiasm and the heart of you guys for Burundi and the microfinance program. if you want to check out some photos and what we are up to these days- you can check out my blog: looking forward to working together- trina


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