Why Microfinance?
The driving mission of Village Hopecore International is to eradicate poverty. The strategy we have employed to achieve that goal is microfinance — but why microfinance? Microfinance is often referred to as microloans or microenterprises; here at VHI, we call it microenterprise because the goal is for our loan recipients to grow a small business or a microenterprise. Microfinance was invented by Muhammad Yunus, Nobel Peace Prize winner and founder of Grameen Bank. Grameen means “village” in Bangladeshi, where Yunus gave out the first microloans of $15 to local women artisans. Yunus found that these small loans could radically improve the lives of women in an effective and sustainable way. Instead of paying a middle-man to purchase supplies for their crafts, with a bit of capital these women could go directly to the source for their supplies, purchase them in bulk, and save a lot of money. They saved so much money in fact, that most of these women’s income crossed the poverty line within one year. Muhammad Yunus’ background and amazing story can be read in Banker to the Poor.
Similar to the women of Bangladesh, the women and men of Chogoria can do amazing things with a little bit of capital. They purchase cows to sell milk, they purchase seedlings and fertilizers to grow produce to sell at the market, and they purchase goods to sell in their shops on the road, all of which could not be done without a certain level of savings. You might ask why they couldn’t just save money for an extended period of time until they got enough to start the microenterprise on their own. But that is the challenging thing about poverty, as needs arise they must be met immediately, with the limited resources available – when a child gets sick, the savings must be spent for treatment; when the crops fail, the savings must be spent for food; when a family member dies, the savings must be spent for a burial; when a child goes to school, the savings must be spent on uniforms and tuition fees. With limited resources, there is no possibility for savings and therefore no possibility for starting a business without some support.
At VHI, we believe that microfinance to facilitate microenterprise is the most effective way we can empower families to lift themselves out of poverty. We see our loan recipients’ monthly incomes increase by 100-300% over the loan repayment period of two years. That means a parent that was earning $46 a month (the international poverty line) to feed 3 children and put them through school now makes $92 a month (an increase of 100%), and is officially out of poverty according to international standards, and has the capital to expand their business and continue supporting their family. You can read about some of these powerful success stories on the Village Hopecore blog under Member Highlights, and be inspired by the awesome potential of microfinance to eradicate poverty.