provision of credit services to low-income clients in the form of small loans for microenterprise
Improve Access to Funds
Our team discovered that to raise capital for building refugees would organize Nafeer—where a group of families contributes a specific sum each week and give the amount to one family at the end of the week on a rotational basis.
An inability to secure credit emerged as a primary obstacle to financing construction projects. So, we came up with the Layla Microcredit System.
We have a microcredit system where we provide small loans, whilst our microfinance services supplement the loans with other financial services such as savings, pensions, payment services, and investment
Due to the inadequate amount of the value of savings for the poor, the provision of savings services in 'microcredit' schemes simply involves the collection of compulsory deposit amounts that are designed only to collateralize those loans.
Additional voluntary savings may be collected as most clients have full access to their savings once they meet a certain threshold. These savings become the main source of capital in financial institutions in rural areas and war-torn places.
Our Micro-credit provides small loans to microenterprises, whereas our microfinance provides other financial services such as saving and investing the meager resources available. Our system emphasizes the provision of credit services to low-income clients, usually in the form of small loans for microenterprise and income-generating activities.
A structure in a medical compound in the Nuba mountains damaged by a bomb dropped on their location.
Village and Community Banking
We have committed to understanding the needs of less-affluent customers and using this knowledge to devise creative solutions to customer problems.
Our village banks are community-managed credit and savings associations established to provide access to financial services in rural areas, build a community self- help group, and help members accumulate savings
Membership in a village bank usually ranges from 30 to 50 people, most of whom are women. Membership is based on self-selection. The bank is financed by internal mobilization of members’ funds as well as loans provided by the Microfinance Institution (MFI).
We also target clients from rural areas and are usually (although not exclusively women) from low-income groups. The selection of the clients is done through means tests which are applied to ensure outreach to the very poor who are pursuing income-generating activities
We also make loans to individual members in groups of four to seven. The members cross-guarantee each other’s loans to replace traditional collateral. Clients are commonly female market vendors who receive very small, short-term working capital loans.
In our community banking, we essentially treat the whole community as one unit and establish semi-formal and formal institutions through which microfinance is dispensed. Such institutions are usually formed by extensive help from NGOs and other organizations, who also train the community members in various financial activities of the community bank.
In our institutions, there are savings components and other income –generating projects included in their structure.
In many cases, community banks are also part of larger community development programmes which use finance as an inducement for action.
We carry an extensive review of key existing microfinance programmes, using recognized poverty assessment/wealth ranking tools to determine the current poverty levels of our Microfinance clients.
A percentage of development partners’ new and renewing microfinance programmes funding is allocated directly to programmes that target the poorest. This percentage is continuously increased until the poorest receive a percentage that is proportional to their representation in the population. Our targeting is usually done through the use of recognized poverty assessment/wealth ranking tools.
Funding for new and renewing microfinance programmes and projects include resources for summary evaluations to be carried out regularly throughout implementation to provide information about the intake poverty level of clients as well as for the basic financial and social impact assessments.
More efforts are geared towards institution building including the strengthening of group functioning in existing Self Help Groups (SHGs) as well as the promotion of the structures of SHGs.
We continuously evolve and develop more effective management information systems to promote the consolidation of sustainable financial service delivery through well-performing SHGs. Our future strategy focuses more on training and capacity building of SHG members as it would improve the productivity of financial service delivery.
For reducing apparent regional imbalances in Linkage Banking more emphasis is put in future strategies on widening the outreach of Microfinance programmes. To increase the effectiveness such outreach strategies may have to include different delivery models. SHGs’ role in development could be further enhanced through increased involvement in development programmes in the area.
We constantly train our Microfinance clients or beneficiaries in Record/Bookkeeping, Financial management, Marketing and Customer service, Basic planning and Decision making, etc. This will help expand their businesses, and hence reduce poverty.
We charge reasonably affordable interest rates so as to help grow the businesses of their clients instead of collapsing them.
Impact on Extreme Poverty
When analyzing the impact of microfinance, the outreach towards the extremely poor and the chronic poor indicate results and impact.
Skills to produce and market goods are important, but also human capital plays a major role in the achievements of our microfinance initiatives in reaching the poor. Since many programmes handle group or village lending structures, social capital is necessary for one to be able to join a programme. Especially the chronically poor are often located in desolated areas. Isolated poor or individuals amongst the bottom poor that lack human and social capital tend not to become members of MFIs. Microfinance can therefore never achieve a large enough outreach.
The petty nature of the businesses and the low skilled levels of performance and knowledge of the borrowers are harming the sustainability of the growth that is achieved. In order for the poverty alleviation to be sustainable, an increase should be seen in productivity and income rather than in consumption.
For more activities with high growth potential to initiate long- term poverty reduction. In order to do this, an increase in loan size will be necessary.
There is largely positive evidence to support a positive impact on health, nutritional status and increases to primary schooling attendance. The impact of microfinance on poverty alleviation is a keenly debated issue as we have seen and it is generally accepted that it is not a silver bullet, it has not lived up in general to its expectation.
However, when implemented and managed carefully, and when services are designed to meet the needs of clients, microfinance has had positive impacts, not just on clients, but on their families and on the wider community. There is however a need for greater assessment of these wider impacts if the true value of microfinance to development is to be understood. One such tool for measuring wider impact is a livelihood security analysis based on a livelihoods framework which analyses how a project impacts on the livelihoods of beneficiaries.
A lesser and more commonly expressed objective behind microfinance is the funding of projects with high returns that go unfunded because the entrepreneurs in question lack collateral. That the loans substantially fulfill this objective is doubtful as well. Hard evidence to this effect is simply lacking. In conversations, those associated with the MFIs would tell you that their loans are overwhelmingly used to finance high-return projects. But when pressed for the source of such information, they invariably cite their own loan officers who in turn cite the borrowers!
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