Large loans vs small loans

You lend your money, on trust, to someone in a country far away to help them earn a living.  You choose whether to make a loan to an individual  entrepreneur like Haleema Bibi  (left) who embroiders shawls in her house in Lahore, or to people like Ricardo Santos from the Philippines, (below) who runs  a relatively established business with paid employees and a regular income. The beauty of lendwithcare.org is that the choice is yours.  

Most microcredit recipients run very small businesses on their own and require very small injections of cash to enable them to gradually increase productivity and consequently their profits. This is true of the entrepreneurs our microfinance partner in Pakistan supports.  They apply for individual loans worth an average of only £110 and many Lendwithcare lenders prefer to make loans to these small scale entrepreneurs.

However,  lendwithcare also facilitates larger loans,  worth £2,000 and more.  The entrepreneurs applying for a loan of this size are mature entrepreneurs who have been in business for several years. They are people who have already gathered business acumen and they need larger loans to grow or diversify.  These more experienced people might have a small to medium enterprise (SME) of their own, and will probably have taken out and repaid several loans with their MFI.  

Take, for example, Ricardo Santos.  He makes and sells traditional sweets. He has a team of 20 regular employees and 40 part-time helpers who regularly receive wages ranging from 150 to 400 Philippine pesos (£2 to £6) a day, a salary above the minimum wage in that country.  Ricardo intends to take on more employees as production increases.  He recently applied for a £4,580 loan but for the past 12 years, his production business went through successes and challenges before it finally achieved its current state. Ricardo’s business is now one of the major suppliers of sweets and candies in various provinces in the northern part of the Philippines. 

When you choose to support someone like Ricardo with a loan, the positive results are amplified by Ricardo’s business ability; many people are helped and there is a bigger impact on their communities. The most important feature of entrepreneurs running small enterprises is that they often employ local people and their businesses become a source of employment in communities suffering from lack of paid work.  These entrepreneurs will not be the only ones benefiting from the loan, they will pass it on in the form of a salary to their employees, usually relatives, friends and neighbours.   And given that the primary aim of microcredit schemes is to alleviate poverty, the positive effect of a loan is multiplied.   

Other examples related to large loans are the women entrepreneurs from Benin who produce red palm oil or transform cassava into cassava flour.  Their typical loan will be worth £1200, but each will employ an average of 3.6 people (mostly other women) in very remote and poor communities.  Other borrowers with an SME take young apprentices and they get the skills and experience that will give them an advantage when an opportunity for paid work will appear.  When people can find jobs in their own communities, the knock on social and economic benefits for all the community can be enormous. 

But, there is also another reason why small and micro enterprises are important in the context of developing countries and that is that these enterprises form the basis for private-sector-led growth.  The private sector can (but admittedly not always) drive the economic growth that is needed to alleviate poverty in developing countries and there is research suggesting that the potential contribution of the private sector to development could far outstrip the potential impact of aid.  (1)

In fact, in some countries, the micro, small and medium enterprises have been recognised at policy level as an engine of economic growth playing an important role in the economic development of the country. 

Lendwithcare offers lenders the option to finance either solo traders, people to whom a very small amount will make a difference but and also to micro and small enterprises owners, who will be able to provide employment to others at low capital cost.   In both cases, there will be a strong, direct and satisfying connection between the person who lends and the person who borrows.

The choice of who you want to lend to is yours, naturally.

Teresa Hall
26.08.2013

(1) ELLIS, Karen. The private sector and development (online). Overseas Development Institute (ODI)’s Policy Brief, May 2010 (viewed August 2013). Available from: http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/publications-opinion-files/5936.pdf

Avail Disability Loan Within 24 Hours For Treatment Purposes?

Getting a loan as a disabled person living on DSS benefits is very difficult. You might have a lot of running around to do and if your disability does not quite support this, then you are in trouble.

Also is it easy to get money because you live on DSS benefits and not really steady income. The answer to this is obviously no, but you no longer need to lose hope. Lenders now offer easy loans for people on DSS benefits within 24 hours as long as you supply details in an online application.

This is present on the lenders website and you can access it from home or an internet café even. Earlier loan applications would be approved if and only if your credit score was good. At loans for people on DSS benefits, people having all kinf of credit tags are eligible to apply. A credit check is not done, so it gets really easy for the lender to instantly approve you.

Lenders have now come forward with instant financial assistance for you through these loans. Not only that you also get an opportunity to improve your credit score and that can be achieved via timely repayment. The amount that can be sanctioned for you via these loans will depend on how much you need for your treatment. Lenders will of course want to weigh your repayment capacity alongside to ensure that you do not find repayment burdensome.

The lender is also not going to make any demand for you to pledge acceptable security first. There is another important factor that you should consider here and that is the fact that these loans carry a high interest rate. That stems from the fact that they are unsecured and lenders are in need to protect their interests a bit.
The other benefits that can be leveraged via these loans include no paperwork. You will not even have to send fax copies of your documents or worry about lengthy documentation.

What is also really good about loans for people on DSS benefits is that there will be no personal visits to the lender’s office to make.

Making loans and transforming lives in Pakistan

Safiya and her husband, Khuda

Picture: © CARE

It is quite fitting that as the holiest month in the Muslim calendar, Ramadan, draws to a close this week and Muslims around the world celebrate the arrival of the new moon, we at lendwithcare.orgwill be celebrating the successful inclusion of our first Islamic Microfinance partner, Akhuwat in Pakistan.

Originally posted on the Department for International Development UK website, reposted here.

Like ‘traditional’ microfinance, Islamic microfinance is the provision of basic financial services to the poor or those on low incomes. However, what differentiates Islamic microfinance from its more ‘traditional’ form is that these basic services, be it loans, savings or insurance, must conform to Islamic financing principles. More specifically these principles include, financial support for socially productive activities only, no speculation or excessive uncertainty, prohibition of Riba or unjust gains, which includes, but is not limited to, interest and no exploitation by the stronger party against the weaker

And although lendwithcare.org, as part of international development charity CARE International UK, has been supporting microfinance institutions across the developing world since September 2010, our partnership with Akhuwat now lets people in the UK lend their money to an organisation that specifically complies with these principles.

Since April 2013, people in the UK have been lending small sums of money to micro-entrepreneurs in the Punjab region through our peer-to-peer lending website and so far the partnership is proving to be a great success and incredibly popular with the UK public. In fact, in just four months lendwithcare lenders have supported 230 self-starting entrepreneurs in Pakistan to grow or start a small business, providing them with the opportunity to lift themselves, and their families, out of poverty.

Naseem Akhtar is an example of one of the entrepreneurs supported by lendwithcare lenders over the last four months.

Tailor, Naseem

Naseem has faced many personal and financial difficulties in her life. Her husband had substance abuse issues and frequently sold valuable domestic household items cheaply in order to finance his addiction. Eventually her husband abandoned the family and has never returned. With help from two daughters Naseem now runs a tailoring business from her home. She earns around 28,000 rupees per month (around £200). However, there are 10 members in her family and Naseem finds it difficult to adequately clothe and feed everyone. She wants to expand her business and requested a loan of 15,000 Rupees (approximately £150) in order to buy an additional sewing machine.

For Naseem, like most of the micro-entrepreneurs supported through lendwithcare, small and reliable sources of credit can create a virtuous cycle of investment and increased income and thereby break the cycle of poverty in which many poor people like Naseem, are trapped.

With 2.5 billion adults, predominantly in developing countries, currently considered ‘financially excluded’ we at CARE are working very hard to create access to basic financial services more readily available. However, in addition to this forced exclusion from the formal financial sector due to social or economic conditions, there is an additional aspect to this exclusion that is not being addressed with perhaps quite the same gusto and this is that many Muslims (estimates vary from one-fifth to half the population) refrain from accessing interest based finance for fear of breaching their religious beliefs. And when we consider 650 million Muslims live on less than $2 a day, it is reasonable to conclude that the unavailability of Islamic microfinance constrains the development of many Muslim owned micro-businesses and therefore the creation of sustainable livelihoods.

In a context like Pakistan, where we have recently started working with Akhuwat, these figures become all the more significant when we consider a third of the population live on less than 30p a day and the majority of the population (95-97%) are Muslim.   

Since teaming up with Akhuwat(meaning brotherhood), an organisation in Lahore, to offer Islamic, or Shariah-compliant loans, our lenders have been able to support some of the poorest people in Pakistan with their businesses by providing loans that comply with their religious beliefs. Through our partnership with Akhuwat we are able to target the poorest and most marginalised people living in Pakistan, who traditionally have the most difficulty getting money for their business – especially women. The World Bank recently found that access to finance remains one of the biggest challenges to Pakistani women who want to grow a business, with less than 25 per cent of Pakistan’s businesswomen being microfinance borrowers. Whilst offered on Islamic principles, the loans are not limited to Muslim borrowers and many Christians (a minority group in Pakistan) are also able to take up these loans.

Expanding lendwithcare’s reach to Pakistan, and our first Islamic microfinance organisation, has been a great addition to our microloan initiative and definitely a cause for celebration for us at CARE. In the words of one of our lenders ‘Lend with care is one of THE BEST practical ways to do something worthwhile with our money. Find out more!!’

Eid Mubarak everyone!

 

By Nancy Thomas, Lendwithcare Executive