Small Change for Big Change: How Microfinance is Changing the World

by Lauren Evans

I love waking up every day. I have been blessed with the opportunity to work for a non-profit that funds poverty alleviation in the developing world through microfinance. Microcredit is small loans given to the poorest of the poor with a focus on women, so that they can start or expand home-based businesses to lift themselves and their families out of poverty. It’s a way to fund the entrepreneurial spirit in the unbanked, to people that have never had access to credit. The average loan size across the projects we support is a mere $164, and with that, a woman is empowered to use her own creativity and energy to change her own life and that of her family. What seems like pocket change to many of us – just a little more than $2 a day – over the course of a year, can change a family’s life forever.

The Roots of Microcredit

“Microcredit ignites the tiny economic engines of the rejected underclass of society. Once a large number of tiny engines start working, the stage can be set for bigger things.” – Professor Muhammad Yunus

Nobel Laureate Professor Muhammad Yunus, a self-made entrepreneur himself, started microcredit back in the 70s by funding small loans to women out of his pocket. After seeing how seemingly small amounts of money could change a woman’s and her family’s life, Dr. Yunus started the Grameen Bank in India and Bangladesh with the objective of helping poor women break out of the cycle of poverty. His solution to world poverty is founded on the belief that credit is a fundamental human right and that with access to capital and financial principles, the poor will help themselves. Today, more than 250 institutions in over 100 countries operate microcredit programs based on the Grameen’s pro-poor methodology, placing microcredit at the forefront of a world movement to eradicate poverty.

The Power of Microcredit

“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”  -Ancient Chinese proverb

Microcredit is a powerful vehicle. Not only does it breed microentrepreneurs and business owners, it is a process where money is repaid and reloaned again and again, creating a sustainable benefit for future generations. It’s not a form of charity – it’s giving a hand up, not a hand out. Microloans give back to those who do not have access to traditional financial resources, since many banks do not lend without collateral or in small sums, and many times the cost of managing borrower’s accounts is too high for them to afford. 

I traveled abroad this summer to meet some of these amazing microentrepreneurs firsthand, and my experiences have forever changed me. Since returning to the states and reminded of how lucky I am in this life, I have thought more about my experience visiting the women in villages of rural India and the favelas of Brazil and the positive impact microcredit has made in their lives. I’m an entrepreneur at heart, and I feel so lucky to have been given the opportunity to learn about microcredit and realize its impact firsthand.

Opening the Door to Opportunity

The favelas (slums) of Brazil are very depressed regions that suffer under the absence of basic infrastructure for safe living: plumbing, access to clean water, sewers and everything else we know that are basic rights to the developed world. When we entered the favelas, we met a 63 year-old grandmother who sells catalog clothing and lingerie from her home to support herself and her family of 8.  The microloans she received have helped her provide for her family and to fix up her home. She’s pictured here at her future store front.

The next microentrepreneur we met with is a seamstress and candy-shop owner who uses the loan she received to buy the equipment and goods she needs to run her business. She has gone from a single mother without a way to support herself, to making 120% profit and supporting her two children to put them through school. Next, she wants to get a freezer to sell ice cream.

The entrepreneurial spirit in these women is amazing and inspiring. Before we left the favelas, we met with a hairdresser who is trying to recover from a string of tragic events.  A few years ago, she had a very successful salon business, but a landslide caused the house behind her to crash into her home and business. In addition to the destruction from the mudslides, looters stole much of her salon equipment and items from her home.  Even though she and her family were left with nothing, microlending has helped her to begin working again. Her family now has hope. They can see a faint light at the end of the tunnel. Witnessing firsthand this woman’s resolve and determination to make it in the face of such adversity really moved (and forever changed) all of us. It’s hard to comprehend how they are able to do so much, with so little.
 
The Group Lending Approach and Why It Works

Solidarity (or group) lending is a model that requires small groups of individuals (usually 5-6 women) to work together to receive and repay loans.  What makes this model work is that each woman’s personal success is reliant upon the group’s efforts to make their payments as scheduled.  The group is small to ensure the commitment of its members, but it’s also large enough to prevent financial collapse of the group when someone can’t pay. Solidarity lending allows microfinance institutions to handle more loans by reducing the time and cost of managing individual lenders. Rather than requiring collateral, these NGOs require each loan recipient to make regular payments and attend meetings. The group lending model is so successful because it allows people to obtain financing while also making the efforts larger than one person, and it builds community and strengthens the bonds that help to make villages stronger and the poor more successful. Pictured here: a center meeting where several solidarity groups are repaying their loans.

I’m moved by the positivity and determination of these microentrepreneurs who do so much with so little. I’m thankful for the good fortunes in my life, for the generosity I have been able to provide, and for the generosity of others. Let’s teach a man to fish. As marketers and global stewards, we can open the door to opportunity so that poor entrepreneurs around the world can change their own lives.