A few months back, I had the privilege of visiting a great community development project in Asia. Located in a spiritually and physically dark area, the local partners there were using a microfinance and enterprise strategy to engage the communities. They strategically chose to facilitate the formation of small self help groups (SHGs) that were community or village based and composed of 20 to 30 people– almost all women.
The partners helped the community coordinate a group savings plan whereby each member of the group would contribute the equivalent of about 20 cents per week and allow those funds to accumulate in a common pot. After they reached a certain level (determined by the group), the individual members could apply for loans from the “kitty” with strict criteria for use of funds and payback to the group.
One woman shared her story which turned out to be a typical story of most of the groups we met with. She took out her first “loan” and bought enough seed of a local gourd to plant a field of gourds. She generated enough enough income to be able to pay back her original loan to the group and take out another loan. This time she planted a higher value (and higher risk) crop of hot peppers. That project also turned out successful and she felt confident enough to take out a third loan and buy some improved livestock. By the fourth cycle, she had accumulated enough resources and loanable capital to start a small goods store in the market.
The key to this self help group is that the accumulated resources come from and belong to the group. We as the outsiders invest in personnel to live among, teach, and train the SHGs as well as facilitate their processes. But the key is that it is their program and their resources. We don’t advocate adding money to their SHG. We let it be theirs totally.
The project started out with a handful of SHG’s. It has grown to about 60 groups with and average of 20 to 30 members per group. We were told that the payback rate was almost 99 percent! Only in catastrophic failures did any member fail to pay back their loan. Moreover, the groups had begun to gain notice with local governments and other groups, and were being recognized for their accomplishments. One of the members, a woman, had been elected to a village leadership position in a traditionally male-dominated society.
But the most amazing thing about the groups was that after five years, they had accumulated a net resource asset worth US $60,000. At the start, the groups could be safely described as coming from the poorest of the poor. But through cooperative efforts and good community development approaches, they were able to save together and financially grow together.
In short, self help groups can be a way to obtain a sustainable source of cash (microfinance) for starting small businesses (microenterprise) to the betterment of families and communities.