Decentralizing Micro-Loans Services for Marginalized Communities

Decentralizing Micro-Loans Services for Marginalized Communities

Uganda
Organization type: 
nonprofit/ngo/citizen sector
Budget: 
$1,000 - $10,000
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

This project will increase opportunities for marginalized groups to access micro-loans and actively participate in local government development programmes. Initially, at least 80% of the 200 members of Prolife Uganda (a partner serving HIV+ persons) will be targeted to consolidate this idea

The project will then be scaled-up by targeting 50 small organizations in Kira Town Council through: training; transfer of start-up loans; establishing a forum for sharing experiences,advocacy and; enhancing linkages with existing service delivery systems.

Finally, local governments, national networks and the private sector will be targeted to enhance capacity for national scale-up of this programme and allocation of resources to deliver interventions for marginalized communities at grassroot

About Project

Problem: What problem is this project trying to address?

Prolife Uganda is a membership of persons living with HIV/AIDS (PHAs) that was established in 2005. A livelihood analysis revealed: -66% of the women are widows -21.8% of the women are separated and -12.5% of the women are married Most members migrated from the rural part of the country in search of employment and have settled in Kira sub-county, a typical peri-urban choice for low-income earners. Since most of them lost spouses, their assets including land were grabbed and access to the social support fabric denied. It is this category that is most vulnerable to the socio-economic impact of HIV/AIDS as they have limited access to land for farming. For survival they have to engage in petty businesses like selling trading, foodstuffs, making crafts among others. However, these businesses do not have enough capital to generate sufficient profits that can be used to meet the basic needs of their relatively large families in terms of school fees, medical care, rent and meals. A recent meeting with members revealed most members have limited access to credit from existing microfinance institutions for augmenting their businesses. They lack collateral for loans and typically deal in small amounts of money. This means that they have few opportunities to save, borrow and invest. Informal credit providers charge very high interest rates further restricting their access. A large proportion of the earnings is spent on rent and medical care, leaving barely enough to meet the education needs of the large number of orphans and other vulnerable children under their care.

Solution: What is the proposed solution? Please be specific!

Partnering student interns from local universities with grassroots organizations to help streamline management and identify community problems/ solutions by: (a) Reviewing tools of governance, setting up effective management systems and accelerating membership drives (b) Conducting community analysis to identify current basic needs and priorities of members (health, livelihood, education and other challenges) (c) Helping to prepare a simple strategic plan for the organization and earmark community projects (d) Training starting organizations to implement a micro-loan programme Helping individual members to appraise priority business plans through: (a) Itemising of business components and their quantities (b) Determining the cost price, sales price and turnover rate for each item (c) Reviewing monthly household expenditure patterns (d) Calculating the gross and net profits (e) Determining optimum business capital and current business worth (f) Assessing potential monthly savings (g) Advising respective members on loan needed and repayment rate (h) Validating findings through teamwork and field visits Issuing group micro-loans to help clients develop practical management skills, minimize business risks, review market potentials and apply group liability as collateral. Using video clips, photographs and SMS to document and disseminate information on emerging market prices and demand. On the job training of both beneficiaries and management in basic records management Introducing group-based insurance schemes like education
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

(a) Diagnosing community needs and priorities (basic needs, present occupation and challenges, educational needs of children and priority support needed by each individual) (b) Training management teams of each organisation, whose clients depend on business (wholesale or retail), art and crafts or agriculture for livelihood. They need skills on how to start a micro-loan scheme by providing guidance on viable member business choices, administering micro-loan management instruments, using an account as a savings tool and maintain basic records (c) Sensitizing marginalized women on business literacy using a customized business plan that reveals the business profile, expenditure patterns and potential monthly savings, current working capital and loan required for the business to operate to its optimum level. This information is used to advise members on business credit worthiness and expenditure limits if they decide to take a loan. (d) Providing trial collateral-free revolving loans in support of profitable business initiatives (wholesale trade, retailing, crafts, poultry farming, vegetable gardening, mushroom growing) (e) Institutionalizing research and dissemination of information on viable markets and prices for dissemination to members via information and communication technology. (f) On-the-job training of management and beneficiary groups in basic records management. (g) Promoting a culture of joint savings to meet common basic needs (medical insurance, educational insurance, housing and land). Each group chooses one area and agrees on an amount to be saved and the frequency of saving.
About You
Organization:
Network for Integrated Community-based Research and Development
About You
About Your Organization
Organization Name

Network for Integrated Community-based Research and Development

Organization Country
Country where this project is creating social impact
How long has your organization been operating?

1‐5 years

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Innovation
What stage is your project in?

Operating for 1‐5 years

Share the story of the founder and what inspired the founder to start this project

In July 2010, NICRAD hosted two student interns from Kyambogo University and attached them to Prolife Uganda to help collect and analyse data on business aspirations and expenditure patterns of their members. The results showed that 85% of the members preferred strengthening their businesses to any other form of service. Working in groups the members assessed the credit worthiness and feasibility of each business and advised their colleagues on areas of improvement. A physical inspection of viable businesses was carried out.
In a feedback meeting, members shared their experience of accessing loans from existing micro finance institutions that raised the following issues.
(a) They have limited skills in business planning, management and customer care;
(b) They lack collateral to access reasonable loans that would trigger sufficient profit margins to meet basic family needs.
(c) They have limited access to essential market prices and demand for their commodities
(d) The informal nature of their group means they cannot start a village savings and credit scheme.
(e) The relatively high interest rates against low profit margins mean that: borrowers spend more than their earnings while servicing the loans; repayments erode into the capital and; often loose property to ruthless creditors.

As a result, a community managed micro-loan scheme was started through provision of a collateral free loan of Ug.Shs. 500,000 (US$ 250) to Prolife Uganda who, after developing their own loan agreement forms, piloted disbursement of the loan to five members with viable business

Social Impact
Please describe how your project has been successful and how that success is measured

Direct benefits realized by 05 members that used the loans included the following: income generation to meet basic needs at household level; employment generation for a member who lacked what to do; capital formation through group savings; business development through an increased volume of tradable commodities; direct access to credit without restrictions and upgrading of skills in business planning and management.

Indirect benefits raised by the entire group include the following: ongoing exchange of information, experiences and views; better capacity of management to deal with group needs, articulate issues and solve problems; enhanced social security through a group-belonging approach; prevention of conflict through dialogue and minimised loss of property due to unreasonable loans;

Other indirect (spill-over) benefits that were raised by the management committee include: an improved spirit of participation, cooperation, sharing, self confidence and self reliance; better skills in recording keeping and business communication, overcoming shyness in conducting business matters; acquiring ability in record keeping, money management and responsible spending during the loan period; a culture of saving for social needs such as education, health and housing.

Direct benefits were measured through review of records, interviews with beneficiaries and observations during field visits to inspect performance of the businesses. Indirect benefits were largely identified through focus group discussions with members and observations during meetings.

How many people have been impacted by your project?

How many people could be impacted by your project in the next three years?

More than 10,000

How will your project evolve over the next three years?

Over the next three years the project will evolve in three distinct phases: During the first year, the activities the programme will be consolidated to support at least 80% of the members of Prolife Uganda who originally numbered 200 but reduced to the present 40 due to a failure of the organization to provide for their basic needs.

In the second year, the project will target 50 small organizations in the entire town council through training, transfer of start-up loans and establishing a micro-loan forum for sharing experiences, and advocacy. Linkages with existing service delivery systems will be enhanced.

In the final year, national networks, local governments and the private sector will be targeted to influence policies and programmes for marginalized communities.

Sustainability
What barriers might hinder the success of your project and how do you plan to overcome them?

There are potential barriers at both the organisatonal level and the external level for this project.
At the organisational level, many members of these groups have poor literacy and numaracy skills, which makes them unable to keep records to track the performances of their businesses. This will be addressed by providing a functional adult literacy program. Diseases such as malaria are also a barrier because their treatment often drains household income that could be spent on their businesses or otherwise improving their lives. This will be combated by introducing an insurance scheme to members that will encourage them to save for preventative health initiatives, such as buying mosquito nets and a parallel preventive health education programme. Another barrier will occur during the scale-up of this project when other organisations are encountered and different cultures have to be dealt with. Conducting institutional and governance training for these organisations as a prerequisite to receiving micro-loan funds will remedy this.
External barriers include lack of visibility about the project, lack of funding in addition to government and private policies that make it difficult for grassroots non-profits to provide micro-loan services. Lack of visibility can be countered by working with traditional and social media outlets to spread the word about the project, disseminating project infromation at national and international forums and supporting grassroots organizations to advocate for scale-up of the project. Lack of funds can be addressed by seeking a variety of donors (including joint grants, community fundraising and corporate donors), charging fees for capacity strengthening services, training organisations to mobilise resources on their own and empowering organisations to advocate to the government to allocate more funds to the initiative. Finally, policy barriers can be addressed through further advocacy for resources as well as educating private micro-finance institutions and decisionmakers in government that this program can assist them in their work rather than hinder it.

Tell us about your partnerships

NICRAD works through partnerships on several different levels. First, NICRAD provides an opportunity for community-based organisations to partner among themselves for projects, dialogue and advocacy. Second, NICRAD links CBOs to universities by mobilizing interns to support their work and international networks such as NABUUR, Global Giving and Better Place to increase awareness and funding opportunities. Finally, NICRAD provides partnerships between CBOs and the government, corporate partners and grant providers for advocacy, awareness and funding.

Explain your selections

While the project is currently funded by revenue from technical support services provided to non-profit organizations, NICRAD hopes to scale-up the project in the future by engaging and fundraising in the local community as well as through corporate partnerships and applying for grants from foundations. We will also support the local CBOs to advocate for increased allocation of resources to this programme through establishing a round table sharing forum at the Town Council and increasing access to national networks.

How do you plan to strengthen your project in the next three years?

This project will be strengthened over the next three years by first consolidating it and creating a learning platform so best practices and challenges can be gleaned. Then new members to the project will be recruited and trained to implement the consolidated version of the project. A forum will be established for sharing best practices as well as for advocacy and to enhance and strengthen linkages between member organisations, government bodies and funders. NICRAD will also seek to increase activities that address other needs in the community. Throughout these steps lessons learned will be documented and disseminated.

Challenges
Which barriers to employment does your innovation address?
Please select up to three in order of relevancy to your project.

PRIMARY

Lack of visibility and investment

SECONDARY

Lack of efficiency

TERTIARY

Need for regulatory/policy support

Please describe how your innovation specifically tackles the barriers listed above.

Lack of visibility and investment will simply be addressed by raising awareness through the media and advocacy to various stakeholders on the needs of the communities as well as providing funds for these communities in the forms of micro-loans. Training of organisation members and analysis of their businesses will address lack of efficiency before the loan is disbursed. The need for regulatory/policy support will be handled by training partner organisations in good governance as a prerequisite for entrance into the micro-loan program.

Are you trying to scale your organization or initiative?
If yes, please check up to three potential pathways in order of relevancy to you.

PRIMARY

Enhanced existing impact through addition of complementary services

SECONDARY

TERTIARY

Influenced other organizations and institutions through the spread of best practices

Please describe which of your growth activities are current or planned for the immediate future.

First we will enhance the effectiveness of this programme by supporting target communities to use this programme as a springboard for recieving and implementing other social seervices including education, healthcare, housing etc.

Second we will recruit other grassroots organizations to adopt this approach within the geographical area of Wakiso District.

Finally we will work with existing national networks and NGOs to promote scale-up of this model into their programmes. In this way the programme will spread to the rest of of the country and possibly beyond to other regions.

Do you collaborate with any of the following: (Check all that apply)

NGOs/Nonprofits, Academia/universities.

If yes, how have these collaborations helped your innovation to succeed?

The Community Development office of Kira Town Council has helped us to mobilize registered and active grassroots organizations to benefit from our capacity building programme. It is through this support that we started working with Prolife Uganda. The office is committed to continue supporting us to reach as many organizations as we are able to. Intrested organizations contribute a membership fee to enable us support them.

Existing NGOs or non-profits support our work through seeking for technical services in exchange for finanicial support. The income from these services largely sustains our activities and helps us to save some money for lending to Prolife Uganda as a revolving loan.

Interns from local universities heped us set up this micro loan project

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