How the Micro-Finance Program Works

Rotating Savings and Loans Cooperative

The Grandmothers Self-Help Groups can have an optional micro-finance group called the Rotating Savings and Loans Cooperative. Although all women are allowed to participate in the meetings of the Cooperative, only the credit-worthy Grandmothers choose to take out loans. And, because many of the Grandmothers are risk-averse, they will not participate unless they know they can repay their loans.

The Treasurer, President, and Secretary of each group decide whether an applicant will receive a loan based on consensus within the group. This decision takes into account who will benefit most from the loan, whether she is trustworthy and if she is able to pay it back.

The loans are required to charge an interest rate no higher than 3% over the whole loan period. Generally, Grandmothers make a payment each meeting. Group members, extended and immediate family members tend to assist when Grandmothers are in need so that they always meet their payments. When a Grandmother makes a payment the Treasurer will recalculate the remaining interest base on the reduced principle after the payment. This encourages women to make their payments as the total interest will be lower the sooner they pay off the principle.

The Self-Help Groups also have savings programs. They employ a variety of different social rewards to women who save including status, encouragement, and praise. The savings system is designed to work for the women in the group. This includes making the system simple and workable for illiterate women having extra checks and balances to help these grandmothers feel secure about storing their savings with other women.

The Investments

Nearly all of our Grandmothers experience food shortages and are subsistence farmers. Therefore, they will invest more frequently in low-risk farming inputs, such as goats, chickens, hoes, fertilizers and seed. These investments directly translate into food security for her and her family.

Other business ventures, such as basket weaving and tailoring, that yield liquid capital but not necessarily food security, are often secondary.