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J ustine Sija, 60, begins her day at 4am, when she buys catch from local fishermen to hawk on the streets of St Augustin village, in Madagascar's southern Atsimo-Andrefana region. The work is hard, but in the past year, access to microcredit has boosted both her business and her hopes for the future.
"Before, I used to make 10,000 to 20,000 ariary ($4.50-9.00, about £3) a day. Now, with the credit, I can make double that amount," she told IRIN. "I can put my four [grand]children in school, buy some livestock and save the rest of the money. Eventually, I plan to sell other goods as well, like rice and other local products."
Madagascar's microfinance sector was established in 1990, but began to experience rapid growth only in the past 10 years; it was worth about 22.7bn ariary ($10m) in 2002, and by 2011, it was valued at about 244.4bn ariary. Microfinance is seen as a vehicle to help Madagascar attain some of its millennium development goals, particularly on eradicating extreme poverty. The UN Capital Development Fund (UNCDF) says about 85% of the population lives on less than $1.25 a day.
Poor people often lack access to formal banking and credit services; according to some estimates, only 2% of low-income households have access to credit. Instead, they rely on informal moneylenders, who charge annual interest rates for unsecured loans of 120-400% – compared with microfinance institutions' (MFI) average rate of 36% for the same period, or 2-4% a month. The country's annual inflation rate was pegged at 5.4% in March.
Madagascar's microfinance sector has about 31 players, which include state, foreign investor and donor-supported initiatives, operating under a legal framework and regulated by the central bank. Since 2011, the UN Development Programme (UNDP ) and UNCDF have jointly managed the $350,000 support programme for inclusive finance for Madagascar (Pafim ), which operates through three MFIs and charges zero interest on loans.
Fatma Samoura, UNDP's country representative, says: "Through this mechanism, we have good hopes that the cycle of poverty caused by poor farmers' debts will be broken."
"People in Madagascar need to work together and the poor need a direct approach to development. The products are there, but people need the right education to be able to access them," says Harinavalona Rajaonah, who works at Ombona Tahiry Ifampisamborana Vola (Otiv), one of UNDP's partner organisations.
"We have tried to put a culture of credit access in place here. The hardest part is to change the mentality of the people," says Jean Olivier Razafimanantsoa, regional director of the credit co-operative Caisses d'Epargne et de Crédit Agricole Mutuelles (Cecam), which is registered with the central bank.
"We work together with other organisations in the city, as some people are members [of other MFIs] everywhere, and so they take out too many loans. Also, the farmers tend to overestimate how much they need. They want us to finance their rice crop, which is worth 700,000 ariary, but they'll come and ask for 2m. When you ask them how they got to this amount, they don't know," he says.
All microloan borrowers receive business advice, but with technical assistance and funding from UNDP, microfinance players have established microcredit education programmes aimed at vulnerable groups. One such programme, run by Cecam, mainly targets poor female street vendors. Razafimanantsoa says the programme has more than 1,300 clients, including Sija and other women from St Augustin village. The women must save 200-400 ariary a week, as part of the initial loan agreement.
They are then enrolled in a lending system that goes through nine cycles, the first entitling the recipient to an 80,000 ariary loan. Each time the clients repay a loan, they are eligible for another, with progressively higher loan ceilings up to 300,000 ariary. Repayment schedules range from a few months to a year. The programme offers education on basic money management, family planning and health issues.
After completing all the cycles, the women become eligible for Cecam's commercial microcredit system. "Right now, our goal is for these women to eat three times a day and feed their children, but eventually, they should be able to build up a guarantee to get
a commercial business going and enter into the regular Cecam system," Razafimanantsoa says.
The weekly savings plan acts as a buffer against hard times, which is especially important in this cyclone-prone country. After cyclone Haruna struck in February, many of Cecam's clients in Toliara, the regional capital of Atsimo-Andrefana region, were left penniless.
"[During] the first weeks, we didn't give out any more loans, as we were afraid people would just use the money to eat. We are now helping some of the women who have lost their homes to reschedule their loans," says Razafimanantsoa.
Prisca, 33, who did not provide her family name, from Belem, a district of Toliara, had entered her second credit cycle, and was using the capital to buy eggs from producers to sell at the market. "After I got the microcredit, I went from selling 100 eggs a day to selling up to 300. I could send the children to a private school and was able to buy some chickens," she says.
But she was left homeless in the wake of the cyclone, and now lives in a displacement camp, sharing a tent with 10 others. "We were left with only the clothes on our back. The first week we stayed in a school. Then the BNGRC [National Disaster Risk Reduction Office] came to give us these tents," she says.
Prisca owes a 44,000 ariary debt to Cecam, and in the interim she has enrolled in a cash-for-work project. "We're working to rehabilitate the roads, earning 24,000 ariary a week. I want to pay the Cecam [debt] first, as that will enable me to take out a new loan. Then, I can earn money again and rebuild the house little by little. This credit is what takes care of our daily needs," she says.
In the wake of the disaster, Sija was grateful for the loan's savings requirement. "We pay back our loans from our savings," she says. "After the cyclone in February, we had some problems paying, as there were no more goods to sell, so it was good that I had saved up some money."
The programmes are working. Hanisoa Ravalison, 43, operates a small roadside restaurant selling sausages and simple meals in the village of Ambanitsena, about 26km (16 miles) east of Antananarivo, the capital. Following a visit by an Otiv agent, who recruits prospective clients, Ravalison decided to expand her business.
"At first, I borrowed money to renovate and enlarge the snack bar and to buy a fridge," she says. "Now, I use money to buy more goods, so I can make more profit." Ravalison is in the 10th borrowing cycle of Otiv's 12 cycles – which have an initial loan of 60,000 ariary and reach a loan ceiling of 440,000 ariary.
"Before I received training, I just used the money I made to buy whatever was needed. Now, I separate personal expenses and money for the business. I also know the difference between sales and profits, and know that I need to use part of the profits to make the company run." On a good day, her restaurant takes in 85,000 ariary. "During holidays and festivals, we sell as many as 100kg of sausages," she says.
Her husband has set up a second restaurant, and two of their five children work in the family businesses. Ravalison says her next plan is to open a wholesale food business.
Liva Harininana Ramanatenasoa began a small business selling charcoal in Ambanitsena. "One day, an agent from Otiv came along and explained that, with microcredit, I could do better," she says. With the first loan, Ramanatenasoa bought more charcoal. "Without credit, I would be able to buy 10 bags maximum, but with credit, I could afford as many as 22, so I made a lot more profit," she says.
Two years after enrolling in the microcredit scheme, Ramanatenasoa used the profits from her business to buy the rights to a stone quarry for 200,000 ariary. She now employs 14 people. Profits from the business have enabled her to build a house and send her children to school. "If it wasn't for the credit, I would have still been selling coal," she says.
Category: Payday loans