"Microloans enable the poor to lift themselves out of poverty through entrepreneurship." -Pierre Omidya
Providing loans to the poor for small enterprises is a recognized solution to alleviating poverty.
Small scale farmers in developing countries cannot borrow from banks because they have no collateral to offer. When loans are available the interest rate is very, very high so starting a new enterprise, diversifying or expanding a business is impossible for impoverished, small scale farmers.
SHARE's Approach to Micro Credit Is Different
SHARE's approach to micro finance is adapted to provide credit to the rural poor with a fair and practical version that differs from other typical micro finance loans that charge very high interest rates. SHARE’s loans are often in stages where borrowers demonstrate credit worthiness with a very small loan before advancing to larger loans of several hundred dollars.
SHARE micro credit loans are for meat and egg laying chickens, irrigation systems, seeds, tools and small animals. Women’s groups have borrowed for sewing supplies, a roaster for cashew processing or equipment such as pots and pans or jars for added value food production.
It is important that SHARE's southern partners and agriculture technicians administer the credit as this allows for loan repayment flexibility when disaster strikes, as often happens with subsistence level production in developing countries.
In eight years success in SHARE’s micro credit programs has been outstanding with little loss.
Loans from the SHARE micro credit fund may be for $200 to $600 to buy chickens, feed and supplies for pens.
A women’s sewing group borrowed from a revolving fund to buy supplies for their small rural business.
A cooperative of 10 families produce abundant crops of beans, corn, melons, bananas and pineapple on 6 acres of fertile irrigated land. A small loan of $600 to each family from SHARE’s micro credit fund in El Salvador gave these families a “hand up” out of poverty.
A small loan is an incentive to enable young men like Pele to start a small family farm, expand his sheep herd and double his income.
Ana took out a loan to buy 9 sheep and two bags of corn. She says “I learned a lot about how to raise livestock, take better care of the land and store feed for the animals. I have already paid for my project and still have eight head of sheep."
Each small loan from SHARE’s revolving credit funds is tailored to fit the situation. These enterprising market gardeners can transport produce to market with this truck purchased with a small grant, a loan and their own resources.
Gerivaldi has quit his hazardous job of harvesting sisal. Manual labour in this drought area of Brazil is low paying and does not meet his family’s daily basic needs. So Gerivaldi borrowed a small loan, about $600, from the SHARE supported Santa Luz micro credit fund. He built a shed, bought 50 chickens and feed and converted 300 square meters of his back yard into a “profit centre”. He is now on his third batch of chickens and can’t keep up to demand. He was sold out at Christmas and has also added a flock of 70 egg layers and sells four dozen eggs daily. “Actually,” he says, “the income from the eggs pays the total feed bill so the meat bird sales are really all profit. And SHARE’s agriculture technicians showed me how to use locally available plants which has reduced my feed costs.”
Gerivaldi is one of 25 men and 29 women who have received a “hand up” thanks to SHARE’s support of the micro credit fund managed by this farmers’ association. Small loans are provided for the purchase of chickens, sheep, a cow, milk goats or garden inputs. The interest rates are 3% with 2% per year for the technical assistance. Success is evident. The defaults are nil and usually the recipients can go on to expand their small enterprises without the need of further credit, a final step to total self-sufficiency. The borrower signs a contract and a committee must approve all loans. Anyone with a “bad reputation” is rejected. This micro credit fund at Santa Luz is functioning well and is ideal support for many small farmers who would otherwise be condemned to a life of continuing poverty.
“Microcredit is about giving hope." - Natalie Portman