Microfinance: Sustainable and Empowering

by Asma Modi (Development Assistant at Adelante)

When I first heard about the concept of microfinance, I thought that it was a brilliant idea. What drew me in to the model is the fact that it is asustainable form of poverty alleviation. Donations of food or money leave an individual with nothing after she has used it. But giving out a loan to start or grow a business requires a person to invest it, leading to a steady income.Microfinance empowers the poor by providing them with the capital they need to create an income-generating activity rather than relying on charity. This facilitates a self-help process rather than dependence on aid. Once they’ve formed businesses in their communities, they are also helping to strengthen the local economy.

Having worked with Adelante for three months now and visiting the field several times, my views in favor of microfinance have deepened further.The women I meet tell me that the loans have changed their lives.While at their homes it becomes clear that these microloans have made a positive impact on their families’ lives as well. With a steady income, clientsuse their earnings to improve their living conditions or buy their children the supplies they needto go to school, so that they can create a better future for themselves.

I am aware of the fact that there have been problems with microfinance institutions in certain parts of the world, such as the fallout of Indian microfinance in 2010.  Rather than identifying microfinance as the root of the problem, it is important to acknowledge what steps can be taken to build client-centered models that protect and empower the poor through financial inclusion. In order for a microfinance institution to succeed,the organization must work closely with each client and distributeloans that the clientsare capable of managing. Because many poor people have not had much formal education, the provision of a free business education/training program alongside the micro-loans is vital.

Last weekI met several inspiring Adelante clients, and one success story in particular stood out. Francisca has been with Adelante for seven years. Prior to joining Adelante, Francisca had started up a micro-business from which she sold small appliances. With a loan of $120, Francisca made her first step in growing her business. With careful investments, Francisca grew her business over the years and has now been awarded with an individual loan totaling $3,506. These individual loans are distributed among those clients who have started with us and have become capable of much greater investments. She started with items such as irons and small stoves, but has expanded her inventory to products including blenders, cameras, and even refrigerators. Francisca’s diligent business and financial management skills have qualified her to access larger sums of capital that have brought her greater profits and afforded her with a higher standard of living.

Francisca’s entrepreneurial spirit has allowed her to expand her business reach into various locations. Having started from one location, she now operates from three storefronts in the peri-urban areas surrounding San Pedro Sula. With this expansion, Francisca has been able to truly maximize her business’ reach into the local market and gain a large number of customers. The pay-off Francisca’s investments have had is clear when comparing her business of seven years ago to what it is today. She has seen that working with Adelante has impacted her not only economically, but also personally, as she explains, “I have developed myself further with the organization.” Women like Francisca represent the huge potential that is often overlooked within poor communities throughout the world. Our commitment to serving these women is based not in their need for support, but rather their capacity to make significant improvements to their households, communities and local economies.

In seven years as a microfinance client she has completely transformed her business and living conditions.She is now a homeowner and owns a car that she uses for her business, unlike most clients who must rely on buses or other less-sophisticated forms of travel. Clearly the expansion of her business has impacted her quality of life. Although Francisca’s story is incredible, it isn’t the perfect story quite yet. Hopefully there will be a point in the future when she decides that she no longer needs loans from Adelante. In my opinion, the goal of microfinance is to help individuals out of poverty so that they can independently support themselves and their families. I believe a microfinance institution has fully succeeded when its clients no longer need loans.

Sidenote: Adelante does not provide the last name of its clients in order to protect their privacy.

 

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