(Micro)Lending a Hand in Rural Malawi

 

Microlending is a fairly recent practice in Malawi, and some aid organizations are beginning to use loans as a different form of financial assistance in place of donations.

On Tuesday June 16 I met with Jack Kazembe, the Regional Manager of the Mzuzu office of the MicroLoan Foundation, and traveled to the rural villages around the area to meet with two women’s groups receiving loans. 

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The MicroLoan Foundation is a London-based organization that provides a different type of international aid.  Founded in 2002, the organization supplies loans to women groups in Zambia and the Philippines in addition to Malawi, where the Foundation has fifteen offices.

Their unofficial motto is: “A hand up, not a hand out”.

Outside Mzuzu, in the rural area known as Simonirenda, Jenifer Manda cares for her own two children as well as six orphans.  Her situation is not uncommon; many other Malawian women struggle to make ends meet to feed their families and additional mouths.  

Manda is able to earn money by selling masamba, or vegetables.    Manda along with fourteen other women in her village applied for a group microloan to fund their respective business ventures.

The first loans a group receives are standard loans—between 3,000 and 45,000 Malawian kwacha (about 20 to 300 USD).  The loans are paid back over a period of sixteen weeks.   The groups may choose to obtain additional loans after paying back their first.  After three cycles of the lending and with business growing, the women may wish for a bridging loan (commercial loan)—ranging from 55,000 to 150,000 MK.

While most microfinance institutions charge upwards from 30 percent interest rates to 40 percent, MicroLoan Foundation interest rates are comparatively low at 24 percent for the first cycle and twenty percent for subsequent loans.

The foundation offers loans to those living mainly in the rural areas outside Mzuzu and other parts of Malawi–people who otherwise usually cannot obtain loans.  There are other microfinance institutions in Mzuzu, such as Finance International Community Assistance (FINCA), as well as Opportunity International and the Bank of Malawi. However, these organizations mostly operate in urban areas.

It is often difficult to obtain loans in northern Malawi, as banks are somewhat discriminatory towards the poor. Often receiving loans, or even simply opening a service account, may require an affidavit from a lawyer, or it may be necessary to own real estate to qualify for loans.  Most poor women do not have these.

But they do have ideas. And with some requiring just twenty dollars to start their businesses, borrowing a loan can enable their ideas to become reality and take off the ground.

Representatives from the MicroLoan Foundation go out into the rural communities, meeting with the village heads, or Traditional Authorities, to explain the program.  From there it is the women’s choice to form a group.

The Kaviwale Group of fourteen members is meeting today in the Simonirenda village for the first time since receiving their loan on May 12 of this year.   Prior to the first meeting the women received two weeks of business by the MicroLoan Foundation, educating them on profitability, interpersonal skills, sample marketing skills, and running a business. After saying a prayer, Chairlady Cindy Kansisha gives the opening remarks to the group.  Next the secretary reads the group constitution, which was created by the women to include their own laws. They will read the constitution before each meeting.

 Blessings Boya, the Loan Officer for the MicroLoan Foundation who is present at all group meetings, explains how the women will record their earnings each week in the record-keeping books provided. The women register as a group, writing the loans they are borrowing, the type of business they are running, and which portion of their loan they are paying back today.   Each woman is given a booklet of her own and is helped to determine how to pay back the loan in increments, how much she has paid already, and her current balance. In addition the women are encouraged by the foundation to save a portion of their earnings each week, instead of paying back the loan sooner, in order to sustain their businesses in the future.

Together the group has taken a loan of 126,000 Malawian Kwacha (MK).  Some women are selling tomatoes and vegetables, while others are making a business in second-hand clothing. 

At 10 a.m. the Chikolesyano Group is having their bi-monthly meeting.  Comprised of fifteen members, the group is in their third cycle of lending from the MicroLoan Foundation.  Together they have a loan of 150,000 MK, which they have used to start up and expand their respective businesses selling vegetables, doughnuts, bananas, tomatoes, and fish.  Several children sit on the laps of their mothers and aunts as the women record their weekly earnings and payments and sign their names in their own booklets and the Foundation copy as well.

Dolika Nyiverda has borrowed 5000 MK (around 30 dollars) to fund her maize-selling enterprise, while Styline Lapunga sells bananas to provide for her three dependents and two orphans.   In addition to charting business growth, the Foundation keeps a record of the number of dependents and orphans the women are maintaining.

The designated treasurer for the group collects the money. The MicroLoan Foundation does not directly take money as payment, however, so one of the group members must go to the bank for a deposit slip to give to the Foundation.  The women are instructed to sign as to which one deposits the group earnings in the bank so the person is held accountable.

Microlending may be one of many new solutions to the dilemma of using aid effectively.  Some donors may prefer to support microfinance organizations that help vulnerable Malawians such as women, widows, and orphans by providing training and lending money to help them grow sustainable businesses and futures.  And perhaps, little by little, this approach is working.

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