Do you know what microlending and micro credits are?
In reflecting on my Ghana experience, it occurred to me that there were participants on the trip with very high-level business backgrounds, who each made the comment, “I had heard of micro loans and micro credits, but I suppose I did not fully understand what it meant.” Since that is common in my experience, I realized others may well have the same experience. I thought I should take this opportunity to explain in my own way, the simple brilliance of micro-lending.
We can all certainly deduce from the various names, that micro loans or micro credits have something to do with “small loans.” But in the end, there is nothing small about them.
The sequence is as follows: a micro credit or micro lending organization establishes a fund for loans in a community or region. The average loan will be in the hundreds of U.S. dollars, so a relatively small fund that is well-placed can have a great deal of impact.
Next, applications are selected from local individuals who have a dream and then they are assessed (and this is important) by a local lending board. As an idea rises to the top, assistance is offered in creating a real business plan and some of the risks of the venture are addressed. In micro lending, we are talking about ‘businesses that most often are stuck where they are, based on simple limitations in transportation, storage, inventory—and the only access these small individuals would have to capital would be at what you would have to call the loan shark level meaning loans at 30% and higher.
As a loan is approved, a small team is put in place (and here is the simple, but brilliant part) and each loan recipient has a small committee to answer and report to. The committee is made up of the individuals who get the next loan when the current loan is repaid. Think about that for a moment in terms of what it means to the level of support and accountability. “I will help you succeed, because when you do, I get my chance to succeed!” Here is an example from the KOMART Foundation in Ghana, a small micro-lending effort, I saw on my travels:
A local entrepreneur saw the need and potential for an internet café in an area with limited access. The idea turned into a business plan with a committee and then a loan. The loan resulted in a very attractive little business location with multiple stations (Photo 1). The location generated customers (Photo 2). Business growth necessitated employees (photo 3). The success sparked ideas and challenges which were addressed by the local partners (photo 4), but with the added support of an international “board” of enthused donors who were invigorated by the success! (photo 5).
Now meet the successful business owner (photo 6) and his bride-to-be – because he can now afford to marry and start a family. This is the man who as he repays his loan (and we were privileged to witness his first repayment—believe me there was pride in this business owner), will launch another business in his own community and will be the anchor in a network of local businesses who care about one another, support one another and, of great importance in developing regions, trust one another.
A quick tally may be in order: a few hundred dollars launches a successful small business that hires several people in the community (creating income for them), provides an important resource to the community (much of the computer use is for online university classes), creates an owner who cares about and can help his neighbors, and as he repays his loan, he launches the next business. On the way this business also made a new family possible. In Ghana, there are strict rules with respect to getting married. You must provide gifts to the family of the bride that most young men cannot afford. You must also live on your own for a year—this may not seem so bad, but the rent on your small apartment is due for a full year in advance—that is tough to come up with even for most Americans. But if you own your own business and learn how to manage money and growth, you achieve these goals, and new opportunities open up!
It was truly amazing to see this process in operation first-hand – to see the lives impacted, the business generated and the change enacted by a few hundred American dollars. Ultimately, this kind of thing changes the lives of future generations by providing the resources for better education, career opportunities and stable family lives for the community’s children – about which we are passionate.
The final thing I will say about micro–lending is that you don’t need to be rich to donate and see a big result. Small amounts of donated funds mean so much. In fact, we are working to support KOMART. If you have a passion for helping those in impoverished nations in Africa through micro-finance, Operation Kids will match it and make sure it gets to Ghana. They key is working with organizations that you can trust and monitor. We saw that in KOMART on our trip to Ghana. We saw the changes, the process, the imapct, the results.
More stories from my trip to Africa to come next week.