Micro-Enterprise Development Program
Conventional thinking holds the belief that poverty is inevitable and hopeless. At MEDIC, we simply don’t believe that. We believe that through our training, people and their enterprises can be developed for success. We see it every day in our training – people’s lives are transformed in how they see themselves and they begin to believe that they can move forward, and hold hope for their future. There are many creative and talented people among the poor and they do not have to be perpetual dependents or perpetually poor. Their dignity can be restored.
“Each of us has the capacity to be incredibly productive and those who realize this are the ones who make the difference in the world,”
says David Bussau, who wrote Christian Microenterprise Development. MEDIC is a pioneering organization and we are eager to take on the challenge to release that incredible potential in human beings, to enable that creative force and drive to be expressed.
Recognizing that as people are trained and grow in their values, principles of conduct the key to building any small business is access to finances. Access to credit, that is properly managed and balanced with personal savings, can be the impetus to starting and growing a micro enterprise. MEDIC has distributed over three million dollars in loans since it began in 2001. Since then MEDIC has created more than ten thousand jobs sustaining over forty thousand family members.
We believe that by tackling the causes of poverty at the grass roots, and reaching the human soul that we are engaged in one of the most effective and sustainable ways to solve poverty. Our approach is about much more than a loan. Our twelve steps of training leading to a loan are all about transformation developing and reaching the inner man, teaching solid life values, and practical business principles, and putting practical democratic principles into action – all in the midst of our group lending process. We believe our approach stands out by keeping the needs of clients a priority. This means doing more than lending money to the poor. It also means reaffirming the spiritual dimension as essential for addressing greed, corruption, and exploitation.
We work through a network of faith-based locally-led development organizations that we develop and affiliate with around the world. We strongly believe in developing indigenous leadership, and our local partners and staff have a unique understanding of the people and the cultures, and the communities they are serving in. Without them, our work would not be possible.
Microfinance is the supply of loans, savings and other financial services to the poor. The term “micro” is in reference to two key aspects. Usually a micro business has only 1-5 employees, and secondly the loan amounts are small. In developing nations like Ghana or Benin, a micro loan ranges from $50 to $500. In Eastern Europe, a micro loan can be as much as $5,000. MEDIC does have a micro loan program in the US where a micro loan can range from $3,000 to $35,000 because the cost of business being much higher. However, a loan of a few hundred dollars may make a huge difference in their lives, giving them the ability to purchase livestock for a small farm, a sewing machine to help make accessories and clothes, or supplies for a small store, for example.
The poor throughout the developing world frequently are not part of the formal employment sector. They may operate small businesses, work on small farms or work for themselves or others in a variety of businesses. Many start their own “micro” businesses, or small businesses, out of necessity, because of the lack of jobs available.
The ways in which people use their loans vary as much as the ways people earn a living. Some buy livestock; a sewing machine and fabric to make cloths and accessories; stock for a local store; a tractor or seed and other farming equipment and supplies. The possibilities are endless as to what a micro-entrepreneur can do with his or her loan. In the United States, MEDIC has financed small restaurants, equipment for small ministries, and even real estate for values based missions.
Our process begins with a feasibility study in a community to see if it has the potential for a Trust Bank program. A Trust Bank is a group of 15-40 persons who come together for training which culminates in the issuance of a micro loan that is cross guaranteed by the members of the group as their trust in each other is strengthened. The majority of the residents of the community must be living below the national poverty line (in developing nations that is typically US$1-2 a day). There should be an existing informal market and access to a local bank, communication facilities and transportation.
Next, our loan officer consults with local leaders, churches, and other groups to source potential clients, inviting them to an informal information meeting. During the meeting the loan officer outlines the Trust Bank program and answers any questions. Interested clients register to form a Trust Bank.
Each registered client is carefully screened for their suitability to the program. The loan officer visits them in their home, of if they have a business we visit them at their place of business and explain the conditions of Trust Bank membership.
The clients are asked to attend orientation training over as many as twelve sessions to receive details on the microfinance program, create internal procedures, identify leaders vote democratically for a Trust Bank Board and develop group solidarity. With the assistance of the loan officer, each member develops a loan application and devises a basic business plan and loan use strategy.
Leaders of the Trust Bank make a recommendation to the group members concerning the make-up of the group. The Trust Bank is officially formed when the group members endorse the recommendation. Members must know and trust one another because they must agree to co-guarantee each other’s loan repayments. They do not want to accept someone into the group who is dishonest or unreliable because this would adversely affect the whole group.
Loan applications are assessed and approved by the Trust Bank program manager. Loans are issued typically short terms of 6-12 months. Loans range in size from $50-$500. Our goal is to be sustainable as an organization. Interest rates for the loans are based on a nonprofit formula to cover our costs of funds, the expense of training and administrative overhead, a small percentage (1-3%as a loan loss reserve, and a 2-3% annual growth rate. The loan officer records and monitors loan repayments at weekly Trust Bank meetings. Our payback rate exceeds 98%, which is truly amazing and reflects the quality of our clients, staff and program.