Repayable micro-finance for sustainable income generation is a relatively recent – and highly successful – development tool. ElectricAid has funded Nandri (formerly Child Aid Ireland-India) since 2006. We have committed €27,000 to their revolving micro-credit schemes since 2013, with very successful outcomes. Fred Crowe is Nandri’s CEO. Read Fred’s clear and simple exposition of how this simple idea works so well in practice.
Our micro-finance programme for income generation started in January 2012. Every month we send enough money to give each of 6 impoverished mothers a life changing loan of Rs.20,000 each. This is now about €250.
The loans are repaid at the rate of Rs.1000 per month +1% interest. The interest is used to build a loan fund for talented children for their third level education. 65 children have benefited from our third level loan programme.
Every mother is a member of a self-help group. Like an Irish credit union in some ways, as they borrow and lend to each other small amounts internally. There are about 15 mothers in each group and they will recommend to the office whom they believe needs a loan and who can also repay it.
If a mother defaults on a loan the group credit rating will be affected so the group insures that the loan is repaid. This is key to the success of our programme.
Most of our mothers have purchased a cow which has just had a calf. It can provide enough income to repay the loan and to leave some money left over as well as providing nutrition for the family. It teaches them how to manage a loan as they must make the repayments every month. Some months they must save for the months when the cow will not be producing enough milk.
A cow, generally only used for milk in India, is a very important member of the family. Most of our mothers work in the fields so they can take the cow with them and the cow eats local grass while they are working.
One enterprising mother set up a tea stand outside her home. She retained a litre of milk every day and made 100 cups of tea. This generated an additional Rs.3000 per month as well as the Rs.2000 she was making from sale of milk to the local milk wholesaler.
After five years each family has probably two milking cows and a few calves so their income has been greatly improved and they now have assets which they would never have dreamed of having. They have greater self-respect in the community and a husband will treat his wife with more respect as she is now capable of generating substantial income for the family.
Giving a loan rather than a hand out has many advantages. It gives a family self-respect, it teaches them how to manage money. Most of all it provides an ever expanding fund in the future to expand the number of loans which we can provide.
We are very grateful to Electricaid for the support which we have had over many years for this and other programmes.