How to build a microfinance scheme in Swaziland
How to build a microfinance scheme in Swaziland
If you build it, they will come? This may be true for Kevin Costner and baseball fields but does not work in Swaziland. Microcredit has been lauded as the magic potion for developing country ailments. If your country has poverty, weak markets, illiteracy, hyperinflation, or scary sewer rats that bite your ankles at night, just drizzle a bit of microcredit on and all is well in the morning! Yes, microcredit has and will continue to improve countless of lives and make communities stronger and more self sufficient. I think microcredit is the perfect solution in many cases. However, there are also many cases where one should just give grants, such as for aiding children, the sick, and the elderly. And there are many situations where microcredit cannot be the first step of the solution. This was my conclusion for the Gone Rural women artisans in Swaziland. For this population, if you built it, loan officers would simply sit lonely listening to the crickets at night.
When I conducted the needs assessment a couple of weeks back I had expected for the women to be very excited about the prospects of having greater access to capital to fund their entrepreneurial ideas and gain an extra source of income. Instead, I encountered a wall of fear. For a women who can barely feed all the children in her care (the one she birthed and her community’s orphaned children), her mental model is only 24 hours long: how will everyone eat today? Savings was minimal and erratic and no one wanted a loan. “How will I pay it back?” was echoed in every focus group.
As I saw it, there were two very real obstacles. Firstly, the women really needed to be taught new skills or technology in order to know how to put the loan to good use. They were trained handicraftsmen, an art handed down from generation to generation. (They were lucky that Gone Rural helped build an international market for their goods.) But this is not enough given the heavy burden that HIV/AIDS has put on their shoulders. Secondly, in the fear, I heard a distinct lack of confidence in themselves because few of them had ever even been able to save any substantial amount in the past to be able to daydream about ideas on what could be done with a little working capital. So that is where I started. Step 1 is to help them save any extra income (no matter how small) every month. This will help them learn about finances, build a small safety net, and most importantly help them develop confidence. Step 2 is to provide training in household and business finance as well as workshops to train the women on new technology or other income generating ideas. This will make their money work better for them and would be a essential to start disassembling the wall of fear of credit. Microcredit would not be introduced unless the second needs assessment revealed a real demand for loans after they can see how their savings can work for them and after they are equipped with the right tools for business.
The recipe I came up with has four steps:
1. Create safe savings managed by Gone Rural
2. Outsource the provision of training in household and business finance
3. Conduct evaluation of savings program and needs assessment to determine demand for microcredit
4. If demand exists, partner with existing MFI to introduce tailored financial products to Gone Rural women artisans
I read through the “recipe” and it seems simple. It is simple. It is not rocket science but what was just as important as the solution is the process I used to come to the solution so that I could be confident that this is the correct path to take. And also so that the logic and solution is clear to my client (Gone Rural) who are not experts in microfianance. Afterall, I was asking them to commit limited financial and human resources. In the end they accepted my recommendations and explained to me exactly how it made sense for their organization, their geographical constraints, and the culture of the women. That was a great moment. They truly understood.