By Hajaratu Kalokoh
Every time you think about microfinance there are a number of things you think of.
Firstly it is a scheme that promotes financial inclusion and secondly it helps in reducing poverty. But to get to this point, it involves a lot of issues.
Microfinance basically provides loans to business owners and entrepreneurs who do not have access to conventional financial support with loans, insurance, and investments to help grow their business. Traditionally, microfinance helps the financially marginalized by providing them with the necessary capital to establish a business in order to achieve financial independence.
In Sierra Leone, there are a number of microfinance institutions. Among the notable ones are the Bank of Innovation and Partnership, A Call to Business Savings and Loans Limited (ACTB Savings and Loan), and BRAC – SL.
Interestingly, BRAC is an international development organisation based in Bangladesh which is considered as home to the man described the pioneer of the concepts of microcredit and microfinance - Muhammad Yunus.
In 1974, Yunus, an economics lecturer at the University of Chittagong in Bangladesh, lent $27 to a group of villagers. Later the idea grew beyond the country. And Mr Yunus was subsequently awarded the Nobel Peace Prize for his work.
Status of women
Developing countries like Sierra Leone have used microfinance schemes to give access to cash for more people and promote financial inclusion for many.
The overall goal of microfinance has always been about alleviating poverty and empowering the less privileged.
In Sierra Leone, poverty rate is still high. According to the UNDP’s Human Development Index 2018, more than 60 percent of Sierra Leoneans live on less than $1.25 a day. And a huge part of this category of people is women.
Globally, more women are poor compared to men and less women have access to capital compared to men. For this reason they have been at the forefront of benefiting from microfinance schemes.
According to World Population Prospects (2017 Revision), women constitute 50.45% of the country’s population.
The issue of women’s empowerment remains a challenging one in Sierra Leone partly because women lack the necessary financial resources to help foster their development. Financial assistance is necessary because it provides the foundation for all aspects of development.
Because of prevalence of poverty among women, many of them do not have access to proper healthcare, education, employment and other basic services.
If we want to empower women, we must therefore guarantee their financial independence, there by giving them access to resources to establish businesses.
Globally, according to the 2017 Microfinance Barometer, women constituted 84% of takers of loans in 2016.
Andrew Kanu, Credit Coordinator at ACTB Savings and Loans, said that their current statistics show that they have 31, 000 females borrowers, against 18, 000 male borrowers across all their eight products.
BRAC, which has only two products: microfinance loansand Small Enterprises Program (SEP), said 100% of its micro credit loaners are women.
These figures indicate that women are major micro finance borrowers in the country and they also show that many do not have access to conventional or traditional banking.
How Microfinance works
Micro Finance works in diverse ways, depending on the organization’s policies and mandates.
Rosaline Lanhuga, Acting Operations Officer for the Bank of Innovation and Partnership, said that they focus on women because it is their policy to empower women, especially petty traders.
Rosaline’s organization also deals with group loans, rather than individual loans. She explained that this is because when they are in group, cooperation to repayment is easier.
“These women have guarantors, someone who assumes responsibility for the group but who is not part of the group,” she said. She added that the guarantor must be employed.
The Bank of Innovation and Partnership also only give loans to a group of women who have already engaged in business. And repayment is on a monthly basis.
BRAC has two products - a microfinance scheme and Small Enterprises Programme Loan. The micro loans are specifically for women, especially vulnerable women.
“We give loans to women who want to start businesses for them to be empowered. But these loans can be taken in groups, whiles in SEP loans, we give individual loans to both male and female,” explained Isatu Turay, the communications coordinator at BRAC. She said their repayment is normally done via installments, on a weekly basis, with an interest rate of 25%.
Among the three organizations, only BRAC gives loan to starters.
There are many challenges for business people to use it as a startup,” said ACTB’s Kanu.
Why microfinance?
In spite of Kanu’s concern, the challenges in microfinance are not just felt by the creditors. The debtors also have their concerns, notable among which is high interest rate, which is a source of a lot of anxiety among them.
But with limited options, there is very little choice to make.
“Family members and friends refuse to lend us money for business. Some of us are widows and we have responsibilities. And there are many criteria in banks relating to loans. Fr example, in banks you need to have collaterals in the form of houses and other tangible properties that indicate one’s worthiness of the loan,” narrated Abibatu Jalloh, a trader at the Lumley Market in the west end of Freetown.
“Most of us do not have any of the above but we need the money for sustainability,” she added.
How has it helped women?
From a simple perspective, microfinance helps women to engage in business thereby indirectly contributing to their economic development and reducing inequality in society.
When women are involved in business, it provides the platform for them to take care of themselves and their families. They contribute in payment of school fees, feeding, and many other needs of the family. This, as a result, helps reduce the burden on their husbands because responsibilities concerning finances at the home are shared.
Abibatu compares microfinance to thrift (Osusu).
“When Osusu loans you a certain amount, you are required to repay within one month, although there is no interest. If it were a microfinance loan, you are required to pay bits by bits, in a minimum of six months. This enables me to develop my business as well as repay the loan,” she said.
Adama, another borrower, who is widow and mother of seven, depends on microfinance lending to sustain her fish retailing business.
“I thank God for micro credit because it has helped me to engage in income generating activity. I was a vibrant group leader because I always encouraged members of my group to pay on time. If there is maximum cooperation, you are liable to other loans which are more reasonable than the previous ones,” she said.
She explained that her first child was able to travel overseas thanks to financial contribution from her business. She is also currently sponsoring her second child’s college education at home.
She said she couldn’t have possibly made such an achievement without microfinance.
Unlike Adama and Abibatu, Kadiatu Kamara, a retailer at Patton Street in Freetown, did not have a fond experience of microfinance and she has no intention of ever borrowing any loan again.
She was loaned Le1.2million and she had to pay Le45, 000 on a weekly basis for ten month.
“The money loaned was not sufficient and did not yield profit, and my concern was to repay the loan to avoid embarrassment, “she said.
(c) 2019 Politico Online
