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Women for Women International's Microcredit Lending Programs

Women for Women International employs a "solidarity group" lending approach for its microcredit lending programs in Afghanistan and Bosnia and Herzegovina. This lending methodology requires that each individual client form a group with three to seven other "microentrepreneur" [1] women pursuing different projects. Loans are distributed to women via their groups.

To ensure honesty and accountability, group members cannot be from the same family. Within her group, each of the women guarantees the repayment of her group members' loans and signs a contract agreeing to share the burden in the case of a fellow member's missed payments. Under the solidarity group model, collateral and co-signers for the loans are not used and social pressure and collective group responsibilities take their place instead. Group peer pressure helps ensure timely repayment and proper usage of individual loans. Once a client has paid off her existing loan, she may apply for another loan within a solidarity group, provided that she has good repayment history and a sound business plan.


The group structure also acts as a mechanism for mutual support, whereby borrowers benefit from the social support system and the creation of social networks inherent in a group methodology that focuses on the importance of solidarity, support, and cooperation. A vital feature of "solidarity group" lending is borrower and lender accountability and mutual respect. Allowing group members to manage their own credit requires mutual trust among all participants, [2] developed through the considerable effort put into the relationship between clients and loan officers, as well orientation, training sessions and regular meetings attended by group members. Through the enhancement of interpersonal ties, mutual obligation, and equality among members, Women for Women International's microcredit lending programs continue to provide socially excluded women with opportunities for sustainable income generation, helping to rebuild their lives, families, and communities.

Afghanistan

Women for Women International began its Microcredit Lending Program in Afghanistan in July 2004 with an initial investment of $34,210, and is the only organization in the country that offers loans exclusively to women. As of November 2006, $2.7 million in loans had been dispersed to more than 7,500 women, with a total of $4.2 million projected over the next five years. The current repayment rate is 100 percent.

The Microcredit Program provides vital income-generation support to some of the most socially excluded women in Afghanistan. With a per capita GDP of $175-220, Afghanistan remains one of the poorest countries in the world. The employment options for women are few, and many women are faced with the duel challenges of supporting their families while taking part in the reconstruction of their country. The program offers a critical service to Afghan women who have been systematically disenfranchised from the social, economic, and political processes that affect their lives.

In order to qualify for a loan, potential borrowers must take part in 10 to 12 hour-long sessions to learn more about the group lending process, borrowing requirements and the importance of timely loan repayment. These sessions are also where the women select a group leader and group name.

Many of the women who receive loans are opening their own businesses for the first time and use their loan funds to purchase things such as sewing machines, poultry, goats, beauty parlor supplies, vegetable carts and building materials. Under the terms of the loans, clients make an installment payment every two weeks. Before the first payment is due, credit officers visit each group to see how the businesses are going and to assess any possible problems. This helps to maintain a strong relationship between clients and credit officers, which is an integral part of the program.

Borrowers are often excited about what the loans have enabled them to do. One woman pointed to the sheep she was raising to sell at a profit "I tell my husband, 'See my sheep? That is my business.'" Some borrowers have taken their enthusiasm to the community level. Upon hearing that a village leader was demanding changes to the program that would threaten its existence in a particular community, a group of clients organized a meeting with the leader and informed him that they wanted the program to continue the way it was. They were successful in their demand.

A total of $4.2 million in loans will be distributed to a growing number of borrowers over the next five years. "Major changes in a country as deeply traditional as Afghanistan will come slowly," said microfinance consultant Joyce Lehman, who helped set up Women for Women International lending program in Afghanistan, "but the dreams are there, and the entrepreneurial spirit among our Afghan women clients is as vital as anywhere in the world."


Bosnia and Herzegovina

Women for Women International began its Microcredit Lending Program in Bosnia and Herzegovina in 1997 to provide socially excluded women with opportunities for sustainable income generation through small business loans. With a current unemployment rate of approximately 40% for the country overall, and 45% for women, very few formal sector employment opportunities exist for women in BiH. The major goal of the program is to create immediate and long-term economic opportunities for women living in poverty, with the hope of continuing to stabilize Bosnian communities still recovering from the four-year civil war that ended in 1995. The program attempts to encourage community rebuilding by recruiting minority returnees and local residents of minority ethnic background, who are more likely to return and remain in communities where opportunities for a stable income exist. As of January 2006, more than 10,000 clients have received loans, thereby increasing the income available to their families, and to the purchasing of local goods and services.

To qualify for the Microcredit Lending Program, a woman and her family must have a combined monthly income of less than KM 250 (approximately USD $150), and she must present a sound business idea. Once accepted into the program, women attend basic business skills classes, write a business plan and then receive a small loan to launch an income-generating project. The organization helps women develop ideas during the business-training component; over 90% of the projects are initiated by the women themselves, and are first time ventures.

[1][1] http://www.politicsandgovernment.ilstu.edu/Garthesis.htm
[2][2] Ibid.