Microfinance-One Piece of the Puzzle
One thing that struck me during our trip to Uganda in November was the amount of entrepreneurialism in Uganda. I was impressed by the amount of people either growing something, selling something or providing some sort of service. It seemed like everywhere we went, there were small stalls that had some sort of business in them. I lost count of the number of businesses devoted exclusively to selling mobile telephone airtime minutes.
Some of the problems that these small or micro business (microenterprise) owners face include: lack of capital, lack of cash flow, inaccessibility to markets, lack of financial knowledge, lack of financial tracking, and lack of business training. Microenterprise owners use their profits to pay for school fees, food and healthcare. Individuals, families and communities benefit from successful small businesses. Microenterprise development has proven to be an effective method for fighting poverty and raising up the poor in developing countries.
We have learned that microfinancing is one piece of the puzzle for assisting small/micro businesses in succeeding. The other pieces include: vocational development, business training, and discipleship. The aim of microfinancing is to fill the void that separates millions of microenterprises from access to basic financial services. Local banks cannot afford the costs associated with lending small amounts of money to microenterprises, nor can they offer loans to those that can provide little or no collateral.
These microloans, combined with vocational development, business training and discipleship, will allow individuals to either start businesses or grow existing businesses. Loan repayment rates are extremely high with one organization, Kiva, reporting over 98% repayment rates. This was confirmed when we spoke with other missionaries in Uganda that had great success with microloan repayments. The repayments go toward funding additional loans.
Successful business owners result in families that can afford to buy food and clothing for their family and the ability to send their children to school to improve their future. Successful businesses also help to strengthen communities, which helps local organizations prosper. These organizations can help to solve issues that their community is facing in culturally relevant ways. Solving issues in Uganda will begin at the grassroots level and takes all pieces of the puzzle and we are excited to find ways we can help deliver pieces of this puzzle.
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