Thursday, June 26, 2008

Microfinance: It's True, Money Changes Things

Now that I'm working in MicroFinance (YAY! I love it!), I have heard the basic explanation countless times, from Muhammed Yunus on down: small sums of money lent to hardworking poor women can increase their productivity enough to help them move up the ladder out of the cycle of grinding poverty, and bring their kids along with them. Today I heard an engaging presentation by Preeth Gowdar from the Lok Foundation on their microfinance work. These talks are always inspiring, but I especially loved today's. Preeth told us about a woman who scratched out a subsistence income by buying flowers, weaving them into garlands like the ones pictured here, and selling them to visitors to the Temple near her stall. With a tiny loan, she was able to purchase a small plot of land and flower seeds, allowing her to grow her own flowers, instead of buying them. Pretty soon, she was able to pay back the loan and take out another, expanding her flower gardening. Now she has a few employees to manage the garden and has hired her husband to take inventory to other Temples on his motor scooter! [The only downside of this story is what happened to the flower vendor who supplied her? Hopefully the MFI is working with her, too!]
Then Preeth summed up the daily experience of microfinance brilliantly:
"In microfinance, the extraordinary becomes ordinary."
Yes, that little infusion of money changes everything. And it's no more than you'd spend on dinner out....

3 comments:

Ross said...

I know that microfinance is the rage right now, but I have heard alternative views that encourage savings / savings matches instead of debt.

What happens if there is a drought or poor weather conditions that cause a poor flower harvest? What does she do next?

Interested in your thoughts....

bpt said...

Two general responses: 1) repayment is in the 98% range. 2) without microfinance loans, which have about a 20% interest rate, folks are forced to go to loansharks at much higher interest rates.
MicroFinance Institutions have been able to creatively add new products, among them, low cost insurance. I am guessing, though not sure, that is how a crop disaster would be addressed.

Focus On Your Money Maker said...

I think it's a great idea and am interested in learning more about it.