Micro banks improve lives of poor

By Andrew Stettler
April 2, 2009

When most American college students think of an African town, they think of a remote village in need of U.S. dollars. But under thatched roofs in Fort Portal, Uganda, people have formed their own savings and loan systems to help them save as little as 10 cents a week.

On a recent visit to Cabrini, Guy Vanmeenen, Catholic Relief Services’ senior technical advisor for microfinance in Africa, told the story of hundreds of communities that are experiencing greater financial stability because they founded and maintain what are called saving and internal lending communities. The program is known as SILC.

CRS volunteer Mary Oldham wrote in her blog that she has seen success in Fort Portal, Uganda through SILC members like Kamuthoghera Wilfred, a Ugandan brick-maker who was able to increase his business’ production because SILC loans.

In Oldham’s blog posted on the CRS Web site, Oldham is seen with a large group of widowed African women and a few men, advising the group’s supervisor on how best to record their savings and loans onto a ledger.

The group is a SILC and they have saved the equivalent of $505 over the span of one year. People in groups like these were at one time living on a dollar a day. Now using a steady savings and loan method, entire communities in developing countries are feeling more secure.

“I was impressed with the savings groups because the people are running the program entirely by themselves,” senior English and communication major Grayce Turnbach said.

“They are working for it and they’re earning it and they’re saving it because they want to. They want to build that stability for themselves,” Turnbach said.

These savings and internal lending communities are what CRS sees as another form of local economic development in addition to microfinance. While microfinance connects profit-driven banks to people living in poverty, SILC is completely community based.

A SILC will begin as a group of about 10 to 12 people who have one cashbox and a ledger. Each week each member adds a specific amount of savings to the bank. When a member of the group needs a loan, the group decides as a group if they wish to make the loan. The money is shown to all members of the SILC in order to keep the lending transactions completely transparent.

At every meeting, each member must put in a specific amount of money into the cashbox as a form of community savings. Over time the savings grow and the resources increase as the loans are paid back.

Transparency is also important in SILC programs. “They all have to remember how much they all put in that week, by the next week and if they don’t then they have to pay a fee,” Vickie Papageorge, senior English and communication major, said.

“It just blows my mind that this actually goes on without an organization or somebody coming in from the outside and giving these people the money,” Turnbach said.

Success stories in Africa and Asia, such as these savings communities are sending a new message to U.S. college students, who may feel that the problems of poverty in Africa can be solved by simply sending money.

Instead, these lending communities are earning their own consistent income. People in developing countries are saying they can work together instead of worrying about aid that may never come.

He spoke recently to a class of Cabrini students studying poverty in Africa and around the world.

The students in Seminar 300: Working for Global Justice and accounting students were caught off-guard to hear of the successes of SILC programs throughout Africa and Asia.

“There is almost [a] political aspect to it. These people are getting together and seeing that they can make a change outside of their personal lives with building a better home for themselves, but also if they want to see a change in their community as a whole they realize that they can do that as well,” Turnbach said.

“Now we see people from different tribes coming to work together,” Vanmeenan said. While the U.S. is looking for ways to prevent conflict, these savings communities bring people of conflicting views together because they can help each other economically.

“There is also an advocacy aspect to it. If they don’t like something that is going on within the community, then they all get together and they talk about it. So it’s not just independently but they’re working together. They’re all talking. There is communication,” Papageorge said.

Andrew Stettler

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