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!