Monday, June 11, 2012

Microfinace
The microfinance session was put on by Reach Out organization. Reach Out is primarily a HIV/AIDs treatment and testing center, and the organization essentially stumbled into creating a system of microloans and savings for the local community, both patients and non-patients. What they have in place is a VSLA (Village Savings and Loan Association) model where a few community members are educated on how to run the group and then become fully autonomous and run the groups on their own. These groups, made mostly of women, save money and contribute to the fund on their own and take small loans when needed. At the end of the year the money is redistributed with those who saved more getting a higher percentage of the money. Theoretically the amount of money in the fund will be much higher because of the interest paid back from the loans. I was very impressed at the system, but also felt that there were a lot of limitations.
What does everyone else think? Is the VSLA model sustainable? Do enough people have access to this service? Where are all the dudes?

PS. Sorry it took so long to post this everyone our cabin never got the stick in country and then I got locked out of my drake email, but its all good now!

8 comments:

  1. I'm going to take a stab at that last one. It seemed that a main reason many of the guys weren't in the groups we saw was because these microfinance groups are usually made from members of the community that have a connection to one another some how. The group I saw was one that primarily made and sold jewelry to make their money (primarily a female occupation). Similarly, we heard of many other microfinance groups consisted of boda boda riders, taxi drivers, and other primarily male occupations. I know that is just one possibility so does anyone else want to take a stab at it?

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  2. The group that I visited pretty much had an equal number of males and females, all from the same village. I found the VSLA method to be very interesting. Borrowing money in Uganda is currently very expensive, with a 30% interest rate. I think the VSLA method is an innovative way to help each other out financially. I could go on and on about this topic, but I am going to keep it short. One thing that I would like to mention is I do not think the security of the VSLA method is stable. My group had three different key holders, and one person in charge of the box. Each person hid their items from the others so that it was "safe". A few of us were discussing how easy it would be to take the box and run with it. It was simply a metal box that could have been opened with heavy clippers. People contribute quite a bit of money into the savings. My group started back in March and already had about $2,300 saved...I was surprised by this. If something were to happen with the money, several would suffer. I think if the VSLA method had more security it would help more with sustainability.

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  3. In my group, it was all women except for 2 men. When I discussed why this is with the MUBS students, they told me that the reason the groups are dominated by women is due to 1) men work during the day and only the wives can show up to a weekly meeting during the day and 2) some men are ashamed to take out loans so they don't join a savings group. I was suprised to hear that women are the ones who predominantly belong to savings group since I expected it to be made up of more men. I agree with Micah in that I think it is a problem that there isn't greater security over the box since it wouldn't be that hard to break open the box. I do think it is great that people have access to money without having to pay a high interest rate (5% in the group I visited), but I do think it would be more helpful if people were able to take out more money since the group I visited only allowed people to borrow 3 times as much as they had put in. I understand that it is to ensure that people don't borrow a lot of money and then default (either because they can't pay it or choose not to), but it does restrict what the business owners can do since they can't borrow that much money.

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  4. The microfinance group was very interesting. In these villages in Uganda there are not any other options for the poor to conveniently and affordably access financial services. It is great that these individuals from poor households are now able to have some control of their life by investing their own income to create opportunities. They are now able to feed their families and more likely to keep there children in school. Even though it is a relatively small amount of money it really makes a difference in these peoples’ lives. I think it is a great beginning to self-sustainability - especially because like Micah said the banks are charging such a high interest rate – however, to me it seems like they are just more able to 'get by' instead of saving and investing there way out of poverty. It is more of a means of survival. There does seem to be challenges into actual sustainability - the lack of true security like Annie and Micah mentioned being 1 problem.

    I guess it is technically sustainable though - because it is working, and the groups and education about saving are growing and spreading throughout Uganda. It is just hard to remember that change happens in small steps and for the kids in the house, the fact that they were able to go to school or have a meal that day – that really makes the difference. It’s a small step that really does make a change to these communities. They might not be building a new hotel but they are now able to contribute a little bit more to their jewelry shop, have more hope, higher self esteem, have a little more food for their family, more time their kids can stay in school -- and that’s what really positively affects the household.

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  5. I thought the microfinance group was quite impressive for not handling their business in a bank. I agree there are limitations, but I think it is neccessary, because the people in the group do not want to lose money. What I noticed was that there was a treasurer, secretary, chairman, and money counter. The meetings are basically set up to run like any organized organization. I think that this will be sustainable for them, because the banks are charging too high of interest rates for the citizens of Uganda to pay back.
    As for people having access to the service I have to disagree. To my understanding VSLA is only used for patients of Reach Out. So for the people who are not members of Reach Out they have to find other ways to receive loans. I know there are other organizations who do similar things with group loans, but they are put into a group with strangers. This makes it much easier to take your money and run, because you do not feel any obligation towards your fellow members. I think these other groups should use Reach Out's system as a model. All in all I think what Reach Out is doing is really helping families turn their lives around.

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  6. I was surprised by the whole situation actually. Before the event, I thought we would be in a building with a speaker talking about Microfinance options in Uganda, like so many of our other events. We were not told what we were going to be doing. Then we arrive in a rural village and walk down this little alley to a small shack with probably about 15-20 people squished inside. I was a bit shocked that this was their "safe" monetary system. But the people in the program seemed really proud of it. They were excited to tell us all about what they were doing. It does show this system may not give them a huge amount of money, but it does raise their hope and self esteem, like Emily said. I think this of all reasons will help sustainability. They have created a program that gets people excited, raises money, and creates a close group of people. I think this program is a small step towards sustainable development.

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  7. My group, was comprised equally of men and women, so I didn't notice a lack of dudes. Honestly, I'm surprised to hear that, because you would think, with gender discrimination, that men would hold most of the positions in these VSLA groups because of the amount of money gained throughout the year. However, I thought this process was SO COOL! It was a great set-up and was fantastic for short-run success in business. WIth that being said I do not find this to be very economically sustainable. There needed to be room for expansion, but after thinking for a while, I honestly don't see how it can be done! However, I suppose this could contribute to social sustainability because it provides an economic and social support system. It also brings communities closer through trust of funds and support! Overall, I thought this was a fantastic process and is a great step closer to begin something greater. However, it's going to take a very bright person to make this switch from short-term expansion, help to long-term growth and prosperity.

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  8. The fact IS THERE ARE MORE WOMEN IN THE WORLD THAN MEN. although men sometimes dont want to join these microfinance institutions, they also borrow from banks aand other fellow men thats why they dont see the need of joining these institutions

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