People who know me know that I support Kiva in getting much needed finance to people who can't get an ordinary business loan. What struck me recently is that microfinance is not just about giving out loans to people in need around the world. Microfinance institutions (MFIs) provide educational programs to people in the local community. During these programs, loan officers conduct valuable discussions on issues such as health, business education, self esteem, life goals, credit policies and natural disaster management. These programs are attended by locals in countries as far afield as Bolivia, Ghana, Peru and Thailand.

What Is Microfinance?
Poor people in developing nations find it almost impossible to borrow money to help them improve their living standards. The large, established banks won't lend money to people with no credit rating. In addition, the small amounts of money that people need are not a good business proposition for the large banks, as the support and administrative costs of the loan outweigh the chargeable interest. People in underdeveloped nations are largely trapped in a cycle of poverty.

Microfinance institutions solve this need by supplying small loans through a local network. They are specialist institutions geared around keeping infrastructure and administrative costs to a minimum whilst distributing funds to local people wanting to start or expand their business. Since the birth of the first MFIs in the 1980s, microfinance is now a worldwide phenomenon.

One such initiative, the Gender Action Learning System (GALS) program, has touched over 2,000 borrowers in Uganda and over 25,000 people in Latin America, Asia and Africa. In fact, some studies show that education provided with microfinance results in better outcomes for borrowers than microfinance alone.

Given my background in training and education, I am struck by the way the program developers are able to tailor their programs to local needs. In communities where e-learning and hi-tech training delivery is unknown, programs are highly interactive and use tools such as board games to get the message across. Other techniques used are story, role-play, individual diaries, demonstration and song. I noted with a lot of interest that the sessions are highly participatory, with lots of discussion in which participants explore new ideas and share what they know. Perhaps there is something we can learn here about how we deliver training in First World countries.

What also strikes me is how empowering these programs are for women in leveling the gender imbalance in some societies. For those not familiar with microfinance, you may be interested to know that individual women borrowers and predominantly female borrowing groups outperform men in loan payment completions.

If you would like to find out more about how you can contribute, visit the Kiva web site and our Kiva team web page. Kiva is the largest organization in the world connecting lenders with borrowers. From a systems perspective, how they manage to connect over half a million lenders with borrowers in over two hundred countries and keep track of repayments is an outstanding achievement.

Further Reading:

Microfinance and Education

Credit with Education

Gender Action Learning