Community-based financial inclusion: Sarah’s story

Sarah Chikuse standing in front of her pigsty

Sarah Chikuse standing in front of her pigsty. She is proud to be one of the few women encroaching into this previously male dominated agricultural territory. Photo courtesy of Alex Dalitso Kaomba.

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>>Authored by Alex Dalitso Kaomba, development consultant and freelance writer

At 39 years of age, Sarah Chikuse’s health is visibly better than the other women in her village. A single mother of two, she lives in Kang’oma village on the outskirts of Lilongwe’s Area 23 in Malawi. Her day starts at 4:00 AM when she usually wakes up to the din of her neighbors’ jerry cans and water tins at the only borehole in the village.

Sarah starts by lighting up her charcoal burner so that it gathers heat while she fetches water at the borehole. Next on the routine (if it’s during school term) is preparing her daughters for school. Once she bids her daughters goodbye, she tends to her newly acquired livestock.

Sarah Chikuse_with pigsty

Sarah in front of her pigsty. Acquiring a pig is one highlight on her growing list of achievements. Photo courtesy of Alex Dalitso Kaomba.

Owning livestock is not only a symbol of status for the privileged but also an envied source of income in Malawi, which has one of the lowest livestock herds per family in Southern Africa. Sarah is proud to be one of the few women encroaching into this previously male dominated agricultural territory.

Acquiring a pig is one highlight on her growing list of achievements. Sarah counts herself a success in being able to afford three meals a day for her family and providing her children with a basic education. She has paid their school fees and provides their books, uniforms, and lighting for evening homework.

Two months ago, her daughter contracted malaria, and for the first time, Sarah managed to hire a car and take her to a private clinic where she got rapid, quality care. The hospital bill was US $12, and she managed to pay it in full.

Life before inclusion

Life has not always been so comfortable for Sarah and her family. After a bruising divorce, she was left with less than $4 tied up in her wrapped skirt, and she struggled to make ends meet. She could hardly afford a single meal for her children. She started selling vegetables at a local market, but her family’s daily expenses were much higher than her profits and the business did not grow.

Sarah desperately wanted to get a loan but did not possess any tangible property except the roofing sheets on her two bedroom house. One institution agreed to use the roofing sheets as collateral for a micro business loan, but after careful consideration, she could not accept the offer. She had seen people in her village having roofing sheets confiscated after defaulting on payments, and she was not ready to risk such humiliating consequences.

In January 2015, she joined a self-help group (SHG), a concept championed by a local NGO, Global Hope Mobilization (GHM), which is supported by a $150,000 two-year grant from Vibrant Village Foundation. The doors of opportunity for Sarah started opening then. (GHM’s self-help groups are basically savings groups.)

As a vegetables vendor, Sarah could make $2 a day from which she would have to provide for her family daily needs. However, the SHG she joined required that she contribute $0.20 a week into the pooled funds. She struggled to keep up for two months until her turn to borrow the funds came up. She used all the money she borrowed to buy a variety of vegetables for her fresh produce business.

Photo courtesy of Alex Dalitso Kaomba.

Sarah feeding her livestock. Photo courtesy of Alex Dalitso Kaomba.

Life after inclusion

Sarah showed me a tiny pigsty with one mother pig and eleven piglets, the first time in her whole life that she has owned livestock. In a few months, she expects to sell and collect over $500. This was possible because she joined an SHG from where she accessed loans totaling a little under $100 over a 3-month period. She pumped this money into her fresh farm produce business by ordering a wide variety of vegetables and fruits which her customers had always asked her to stock. Her business revenues increased rapidly.

I asked her what her most outstanding benefit from the SHG was. With a very wide smile and beaming face, Sarah had this to say:

“I was a pauper with no hope, but the SHGs taught me the importance of saving from the little I get and how to access low interest loans. Today I can feed my family good meals every day, I have a piggery project that will soon start bringing me revenues. I intend to diversify into selling kitchenware which brings me higher profits than vegetables and even if I stock more kitchenware it is not perishable.”

Anne Chiudza from Global Hope Mobilization says, “We are aware that the marginalized, poor, and unbanked population has its own means of survival, and from the little they get they can change their lot in life by using their numbers to pool funds together. Our organization believes in facilitating improvement of livelihoods through community owned strategies and the self-help group concept is one such strategy.”

A measure of how these groups can advance community development is a borehole which the women are planning to have drilled in a year’s time at a cost of $4,000 without any donor funding.

Sarah’s story is just one among many in her 20-member group. They have managed to improve the lot of their families by building or improving their homes, by improving their families’ nutrition, and by consolidating their economic independence through self-help groups. There are 15 more groups in surrounding villages, and evidence is clear that the women’s hard work and commitment is bearing fruit for the betterment of Kang’oma community’s standard of living.


More about Global Hope Mobilization’s self-help group model

Global Hope Mobilization’s (GHM’s) self-help groups are savings groups whose sole aim is to provide a low-interest pool fund from which members (and only members) of the group can borrow to inject into their businesses. Members can save through loaning out the savings over a period of four weeks.

The groups loan out the money from the very first meeting. No funds are kept in a box of any sort because soon after contributions have been made, a borrower must take the money immediately. The funds are only deposited in the bank when they have multiplied and no members are ready to borrow that week.

Question: How does GHM create the groups?

Answer: At the beginning of the project last year, Global Hope Mobilization trained four Community Facilitators who were all drawn from the catchment community. Their role is to spearhead the formation of the groups and act as resource persons for the groups on behalf of Global Hope Mobilization.

The SHGs are self-replicating because the roof limit for each group membership is 20 members only. To date GHM, is supporting 100 groups with a total of 2000 members, all of whom are women. There is, however, an emerging demand from men in some villages to join the groups.

Q: Are the SHGs self-sustaining or are they reliant on GHM for ongoing support / hand-holding?

A: The SHGs are self-reliant. GHM only facilitates their financial literacy training and monitors their early growth stages, providing guidance and advisory [services] where needed.

Q: What training does GHM provide to the SHG members? Do they offer other sorts of capacity building like financial literacy, health, women’s empowerment, etc.? Do they try to link SHGs to other services like government social protection services?

A: The flip side of [GHM’s] concept is to provide women with a platform and confidence to identify and demand social services from government departments like water, health, etc. Every group meeting ends with a social discussions segment. All issues are recorded for future reference and actioning. Using the SHG as a nucleus for change, GHM facilitates health talks and [sexual and reproductive health] SRH awareness campaigns.

Q: Do all SHG members take out a loan? Or, do some just use the SHG to save? What is the interest rate on loans (if there is interest) and what is the savings interest rate (if there is one)?

A: Around 75 percent of members take out loans at an average interest rate of 10 percent per month. The loans period is 4 weeks maximum, depending on the loan size and specific group by-laws. Interest [on] savings is 10 percent.


About the author

Alex KaombaAlex Dalitso Kaomba is a 35 year old Malawian rural development consultant and freelance writer. He lives in a village on the outskirts of Lilongwe the capital city of Malawi. He works with International and local NGO’s in Malawian villages in the areas of access to energy for maternal health and education, HIV and Aids, education and environmental interventions. Alex has a passion for development work and the African stories of self-sufficiency and sustainable rural development. His favorite pastime is reading, watching sport and playing cricket.

alex.kaomba[at]gmail.com | @AlexKaomba | https://www.facebook.com/kaomba


Related reading

The Synergy of Financial and Energy Inclusion

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Sebastian Groh, Project Manager, MicroEnergy International, Germany

When reviewing the agenda and discussion topics at the upcoming 2013 Partnerships against Poverty Summit in Manila, one thing is becoming increasingly obvious: microfinance is at an exciting inflection point in its evolution.

What started as a simple yet revolutionary idea to provide small loans at reasonable prices to trust groups of very poor women now encompasses a vast range of financial products and services. From mobile banking, crop insurance, pension savings funds, water and sanitation loans to humanitarian disaster relief microfinance funds, microfinance institutions (MFIs) have expanded and diversified their offerings to respond to the needs of their clients.

In my opinion, this represents an emerging understanding that financial inclusion is an effective mechanism to address additional causes of poverty. By linking financial inclusion and health, we can ensure that parents can pay for their children’s medications. By linking financial inclusion and agriculture, we can provide assurance to farmers that a bad harvest will not cripple their family financially. By linking financial inclusion and communication technologies, we can bring services closer to clients more effectively and less expensively, allowing even the most hard-to-reach clients to take control of their finances.

Such approaches help an MFI diversify its portfolio and reduce risk, but, more importantly, it expands financial and social inclusion to the most vulnerable.

MEI_photo_592x287

MicroEnergy International, Bangladesh (Photo credit: MEI)

MicroEnergy International is a German-based company that is founded on a similar belief. We are committed to helping Secretary Bank Ki-moon and the international community to achieve the “sustainable energy for all” goal (SE4ALL) by supporting MFIs through the process of developing and providing “green microloans,” i.e., financial products that help clients finance a renewable or efficient energy system for their home or business.

Energy inclusion refers to reliable and affordable access to energy services to cover a household or a small to medium enterprise’s basic energy needs. Our projects address the relationship between energy inclusion and financial inclusion as a critical impact point to improving poverty levels of low-income clients. We have also found a reciprocal causal link between the two.

MicroEnergy Supply System offers loans for electrical energy products (credit:  MEI)

For example, access to finance can lead to energy inclusion simply in terms of affordability and financial means. People who have access to financial services are able to finance their basic energy needs by either paying for grid-supplied electricity or purchasing a distributed energy generation system of their own.

Energy inclusion can lead to financial inclusion by financing the purchase of a distributed energy system through small repayments to retailers or intermediaries over an average span of 2-3 years. In doing so, clients are able to demonstrate repayment ability, accumulate collateral, and increase their productive capacities.

Bangladesh has shown so far that financial inclusion, particularly through microfinancing mechanisms, provides a fertile environment for distributed energy solutions, especially for those at the base of the pyramid (BoP). In the field of energy access, Bangladesh has been among the first movers, leading the globe in distributed sustainable energy generation, particularly among the rural poor.

According to the World Bank’s IDCOL Solar Home Systems Project, as of May 2013, 2 million solar home systems have been sold in Bangladesh. In a recent field study, MEI found that people with access to solar systems started to share their electricity against a fee. This fee translates into a cost of USD 3.56/kWH for light and USD 10.53/kWh for mobile phone charging (for comparison, current electricity price in Germany is approx. USD 0.25/kWh). It is clearly unjust for the poor to pay exponentially more than but also unveils a huge untapped potential for the energy inclusion movement.

MicroEnergy Supply System (MESUS) household schematic. (credit: MEI)

MEI estimates that at least 1.6 billion people lack access to both financial and modern energy services (World Energy Outlook, 2012; Global Findex Database, 2012). However, our ability to reach this demographic hinges on the ability of financial actors, as well as those in the renewable energy sector, to scale up significantly in the coming decades.

In our experience, MFIs welcome the opportunity to supply their clients with small-scale, sustainable energy technologies when there is sufficient support in technical assistance. Not only do green microloans allow them to diversify their portfolio, they decrease risk, improve the health of clients and, most of all, increase client income-generating capacities.

Moreover, with the increasing awareness of the benefits of sustainable energy solutions, especially with a significant productive use element, such as solar crop dryers, mini-grids, or improved cook stoves, demand is increasing significantly. Local producers and suppliers are slowly starting to take advantage of this significant market opportunity. And it pays off: results from our projects in Peru show a 30-day portfolio at risk of 0 percent and higher returns for the energy portfolio, compared to the overall portfolio performance.

MicroEnergy International aims to engage stakeholders in the energy and microfinance industries to join us in this approach, expanding energy access and financial inclusion throught the developing world. We will be presenting the topic at the 2013 Partnerships against Poverty Summit, at our workshop on October 11th, at 11:00 AM, and look forward to a lively discussion with panelists and participants alike. We hope you will join us in this effort to make clean energy accessible for all!

mei_logo_emailSebastian Groh is project manager at MicroEnergy International (MEI), a Berlin based consulting company focused on the linkage between microfinance and sustainable energy supply, which he joined in 2009. Sebastian leads a consortium for the EcoMicro project in Mexico. He is also responsible for the implementation of the Energy Inclusion Initiative in the Philippines. Along with his work for MEI, Sebastian is currently pursuing his PhD at the Technische Universität Berlin on the role of energy in development processes. He will be moderating the Microfinance Goes Green workshop at the Partnerships Against Poverty Summit in Manila on October 11th, 2013.