Posted By: Katie McIntosh on September 15, 2011
I apologize that is has been so long since I last wrote, but life has been a bit crazy. The month of August consisted of a lot of travelling within Sierra Leone, as well as a visit from my supervisor in Canada and a visit from my parents. When I have had time, the internet connection has been poor and my computer conveniently has a virus that I can’t get rid of. That said, I am truly having a great time and becoming more attached to Sierra Leone and the people here every day. I can honestly say that despite its many challenges, I love coming to work every day and living life in Kabala.
In case you aren’t familiar with what microfinance is and how it works, let me give you a bit of an overview. Microfinance is the term used to describe any financial services provided to the poor and low-income members of society. In terms of SWET, we currently offer our clients micro-credit, or small loans for their businesses. The portion of the population served by microfinance is often considered unprofitable or unviable for banks to serve, since they generally require higher administration costs and they do not own any substantial collateral, which makes their loans very risky. Therefore, they generally do not have access to other formal financial institutions.
To accommodate this market and lower the risk of loans with no collateral, SWET and other microfinance institutions use solidarity groups to guarantee the loans. Before applying for a loan, clients must form their own solidarity groups of 4-6 women whom they trust. This group receives loan disbursements together and makes repayments through their group leader together. If any member of the group defaults, the whole group is responsible, a policy which is designed to encourage clients to choose group members who are trustworthy and to encourage clients to cover for each other when repayment becomes difficult. Additionally, to become eligible to apply for their first loan, clients must participate in a number of business development training sessions. These sessions are designed to train them in business, while integrating integral development themes like health, as well as to teach them about SWET policies and procedures. However, one of the most important goals of the training is to weed out bad clients. People who participate in all of the trainings, despite the numerous other responsibilities they have, show their commitment to the program. Additionally, during the trainings, the loan officer is able to get to know the potential clients so that they can hand-pick the good ones. Basically, since micro-credit involves lending with no collateral, the institution needs to put a high focus on selecting quality clients with good character who are committed to repaying.
The first loans given out are always about $50, but the amount increases by about $25 every loan cycle (if the clients have enough business capacity) as the group builds a credit rating with SWET. The main proclaimed benefits of microfinance are that it provides long-term increases in income and consumption amongst the poor and smoothes out irregular cash flows. Our clients often report that the loans help them to send their children to school, save money for emergencies, invest in their businesses, and simply help them to advance and rely on themselves rather than on others. That said, microfinance is a balancing act. On one hand, it is a tool designed to help poor and marginalized people manage their finances and improve their lives. One the other hand, it is a business that has to make money and at one point (when NGO subsidies diminish) become sustainable. It is very challenging work.
Sierra Leone is an exciting place to be working, especially in a field like microfinance, because there are a lot of positive changes that are happening here right now. Since the civil war ended in 2002, the country has been experiencing relative peace and security, allowing for recovery and development.
Here are some examples:
Freetown, the capital city, now has electricity, when only two years ago it did not. Practically everyone has a cell phone (or two), when no one did five years ago (and there weren’t really landlines either). Agriculture is developing, a railroad is being constructed by a mining company, banks and microfinance institutions are popping up and many people have confidence in the current president.
That is not to say that there aren’t a million challenges. Maternal and infant mortality rates are amongst the highest in the world, which is evident in my everyday activities. In the villages, girls aren’t often given a chance to advance their education and even when they are, the quality of education is generally poor. The adult literacy rate is very low, especially among women, which complicates efforts in education. These are real problems and they are gradually changing with the hard work of NGO’s, International Organizations, the government and other change agents, but change takes time. For many of these issues I can only hope that the work of myself and others is contributing to positive change and that 5, 10 and 20+ years down the road things will be different.
Anyway, I hope that provides you all with a good update on what I’m up to, as well as some of the opportunities available beyond graduation.