Over the past decade, micro-credit programs have proved effective at creating jobs and generating income among the very poor in developing countries. The success of these programs shows that many poor and low-income people have the potential to become successful entrepreneurs, but lack access to the necessary credit and skills training.
The focus of the World Job and Food Bank (WJFB) is to assist poor women and their families through the implementation of micro-credit programs. Women comprise most of the poor throughout the world, and their economic positions are often adversely affected by a lack of access to capital and productive resources. WJFB also works with other institutions to organize macro-credit programs for infrastructure projects in developing countries.
A woman’s economic position directly affects:
her ability to purchase needed improvements in health, housing, and education
her bargaining position and power in her family and community
her ability to act against violence in her home and in her world
Economic participation is key in building a woman’s confidence and capability, and improving her status in the community. Additionally, access to resources gives a woman the ability to build her income and assets. This process allows for the creation of an environment that assists low-income and poor women build businesses, improve living conditions, keep families well-fed and healthy, educate children, develop respect at home and in the community, and allow for political involvement.
Microcredit loans provide these women with access to start-up capital through small loans, but that is only part of the process. The goal of such microfinance is to bring long-term economic stability to impoverished areas. Thus Microfinancing also provides other services such as access to savings, and the NGOs running the programs also help fund the creation of infrastructure in remote areas, like roads and buildings.
There are four basic types of micro-credit loan models: Community Banking, Individual Banking, Village Banking and Peer Pressure. The success of any one model depends greatly on the culture it is applied to.
To work in partnership with local Non-Governmental Organizations (NGOs) on micro-credit financing projects;
To provide poor women (especially single mothers and young drop-outs) with skills in small business and financial management;
To provide funding and loans to poor women so that they can establish and operate profitable small-scale enterprises, allowing them to become self-sufficient and improve their standard of living;
To educate and improve access of poor women to existing financial
systems, government facilities and services;
To establish local infrastructures that will reinvest profits from these initial loans into revolving credit funds, which will benefit additional poor people
Work in partnership with various organizations;
Participate with partner organizations in the planning of micro-credit programs;
Identifying and addressing training and credit needs for the project;
Providing the necessary training and access to credit for the participants;
Motivating participants to develop financial and business plans;
Working with local organizations to plan and establish the infrastructure for an effective revolving credit fund;
Monitoring the ongoing effectiveness and sustainability of the micro-financing group, income generation, and the revolving credit fund;
Facilitating workshops whereby various micro-credit projects can share experiences and learn from others.
The following principles are the basis for successful micro-credit programs:
Appropriate encouragement, training, and resources allow low-income or marginalized women to realize their full potential;
To effectively utilize credit and resources, women require skills in self-discipline, planning, money management and business operations;
Women are motivated to develop and follow-through on their visions by uniting themselves in peer groups with others who have similar interests;
Local women are motivated to initiate and participate in successful income generating activities when provided with access to credit to match their increased money management and business skills;
Women are often underestimated as potential contributions to their community; therefore, micro-credit programs involving women have a significant impact, as women play an important role in community life;
Peer groups and community create and enforce repayment regulations for loans, which results in repayment rates which are often higher than traditional banks;
To establish a beneficiary’s credibility, initial loans are relatively small, but they can gradually increase as the beneficiary demonstrates reliability to peers and to the supporting agency;
To maximize the success of the credit program, it is crucial that participants choose which activities will be financed with the loan, and, if necessary, obtain the provided training;
Several organizations have skilled staff and similar credit programs, but lack the financial resources to implement or support those programs on a large scale.
The WJFB works without political affiliations and assists poor women and poor people, irrespective of religion, race or creed. Additionally, the WJFB will only associate with other organizations that practice similar policies of non-discrimination.
Presently, WJFB is participating in micro-credit projects in: Peru, Bolivia, and Indonesia.
Micro-Credit Project Examples
Category: Payday loans