Micro loans are changing lives in Uganda
EL CENTRO – Locally based charity Burning Bush International has announced plans to seek support for another phase of its poverty alleviation projects in the Kumi-Ngora area of Uganda.
BBI was formed by El Centro residents Jim and Nancie Rhodes in 2012 to bring clean water, female goats, educational support, and much more to tens of thousands of villagers in Eastern Uganda. BBI, along with its Ugandan partner Eric Sabiit, continues to impact lives in Uganda in a big way.
Fighting poverty through micro-credit
The concept of microfinance or micro-credit started to take off in the 1980s when Dr. Mohammed Yunus established the non-profit Grameen Bank (“Village Bank”) in Bangladesh.
The idea was new, but depositors agreed the bank would pool their deposits and use them to facilitate small business loans to impoverished individuals in their country. Its initial success was so great that it captured a wide following and spawned many duplicative efforts. Dr. Yunus received a Nobel Peace Prize in 2006 for this innovative idea and for helping improve the lives of many.
Expectations for this concept rose quickly and it was seen as the solution to moving the world’s poor out of poverty. But its success attracted many investors including non-profit and for-profit copycat programs. After a few years, detractors were pointing out reasons the approach wasn’t living up to its expectations.
Rhodes said he believes that “greed and the desire for control of the process distorted the potential benefits of micro-lending.”
Micro-credit/savings groups in Uganda
Rhodes said the approach BBI is applying in Uganda is not bank- or investor-centered but puts responsibility in the hands of micro-group members. Groups generally range between 20 and 50 members. Each group elect officers and begin to pool member’s savings, usually under $1, at weekly meetings.
Each group has its own way to safeguard the pooled savings. One group with which Rhodes is familiar uses a strong box that requires three separate keys to open it. The keys are brought to the meeting and the box is opened in front of everyone. Meticulous public records are kept by the elected treasurer.
Ultimately, groups make their own decisions about granting small loans to individual members. Borrowers pay interest rates between 10 percent and 15 percent and loans are repaid over four to six months. Interest received goes to benefit members of the group. At the end of each year, members decide if they want to take out their share of the year’s profits, that is, interest charged during the year. If they leave their profit in the lending pool, their ownership percentage of the pool rises by that amount.
So far, 10 micro groups have formed in the Kumi-Ngora area, but only six of them have lending pools large enough to begin funding small loans. When a new group is formed, it may take months before the lending pool reaches a critical size that can accommodate small loans.
Last year, BBI made small contributions (several hundreds of dollars) to the lending pool of several new groups. BBI wants micro groups to be self-sufficient and to manage themselves, but a little boost to the loan pool in the early stages can be helpful to get new groups off to a good start.
Success stories
BBI and its donors have been involved with the Nyamongo village for several years. The village water committee is successfully managing its own clean water well, orphans and other very poor children are overseeing their growing herds of goats and cows, and blackboards at the village’s primary school were recently refurbished.
This region’s first micro-credit/savings group was started in 2017. It grew quickly, and a second group was started about a year later. Here are a few of their success stories:
• One man’s family received a small loan to acquire chicks and eggs. As the chickens grew and produced eggs and as the chickens reproduced, the loan was quickly repaid. In a short time as their family business grew they were able to “trade up” to a female goat and buy uniforms for their children to attend school.
• Domestic abuse occurs too often in families struggling to exist. Jennifer, the mother of four, joined the micro group and was able to use a loan to buy tomatoes and silver fish to sell at her roadside stand. The loan was repaid quickly and as her business grew, she was able to buy uniforms for her children. In Uganda, children are not able to attend school unless they wear a uniform.
• Catherine Iguto is a leader in her village and is highly respected. Before her group formed she had a small business that bought produce from her fellow villagers and then sell it at a local market. After she joined the group, she used a loan to purchase larger quantities of produce, up to 10 large bags, rent a truck and then travel to the border with Kenya. She sold her goods to buyers from Kenyan restaurants and hotels at a regional market near the Uganda-Kenya border. She explained to Rhodes, “This way, I can eliminate the middle man and make a larger profit”.
• Angel used a loan to start a small rock quarry business that in time employed her family and others from the village. Her success enabled her children to attend school and the increase in family income helped reduce the domestic violence being inflicted on the family by the father.
•John was a teenager living with mother and five siblings. His desire was to purchase a motorcycle and become a “bota-bota” driver. This refers to a common way to travel in Uganda with young men providing a taxi service in cities and rural villages. He bought a used motorcycle and was able to repay the loan in less than two months. He was very grateful to the group for its support of his business and family.
• A single dad with seven children was struggling to survive. He joined this micro group and received a small loan to purchase a female and male pig. He was able to repay the loan from the profits of the sale of the first piglets. Over the years, as his new business grew he has made improvements to his hut, send his children to school, and purchase goats and a cow. Rhodes recalled that, “In telling his story to us, his eyes filled with tears as he praised God, Eric and BBI for changing his family’s life.”
Critics say that micro lending has fallen short of transforming emerging economies around the world. But, as these stories confirm, access to capital and personal commitment can have a tremendous impact on the lives of individuals and their families.