This year is the 10th year anniversary of the establishment of Microloan Foundation in the UK, where it all started. The following is a report they prepared for this important anniversary. Current exchange rate is A$1.50 to £1.00.

From its very humble beginnings of £10,000 and a man on a bicycle, Microloan has grown into a thriving organisation that is making a difference in numerous lives throughout Zambia and Malawi. Having helped over 110,000 women lift themselves out of poverty, Microloan’s different approach to charity offers empowerment and financial independence to those in the most rural areas, and continues to work toward breaking the cycle of poverty. In this issue we bring you fresh stats from the field, and an insight into the training our clients receive.

The Microloan Foundation began in 2002 as a venture in grassroots entrepreneurialism, with modest means and big dreams of bringing a permanent, positive change to the lives of some of the poorest women in Sub-Sahara Africa. It was a slow but steady start, with much learning along the way. Now, after a decade of providing financial access and training to women in rural areas to begin their own businesses, Microloan continues to grow, develop, and recycle donations in a continuous effort to break the cycle of poverty in this part of the world.

In the Microloan Foundation’s first year, a total of 66 loans were made to 26 women. Nine years later, in 2011, 49,437 loans were distributed to 27,140 women, benefiting approximately 135,700 children and dependents. In the first six months of this year alone, the Microloan Foundation has dispersed close to 1,500 loans to impoverished women throughout Malawi and Zambia. When taking into consideration the average number of dependents of each woman, and the reach of these loans once repaid and redistributed, the impact of even the smallest donation is extensive. A modest increase in a family’s financial resources provided through sustainable microbusinesses can have overwhelming effects, including food security, access to education, and basic healthcare, which will ultimately transform the daily lives of our clients and their families.

Kenson Chiphaka, the notorious “man on the bike” who in 2002 distributed the very first cycle of loans and is the current CEO of the Microloan Foundation in Zambia states,

“Microloan has developed significantly over the years. It started in Malawi from a small district along the Lakeshore, and the head office was relocated to Kasungu, close to the capital of Malawi, for easy administration. Expansion significantly increased until MLF went international in 2009 and opened an office in Zambia. By then, diverse skills and more professionalism had been built into the Microloan team and high quality services were being offered to the poor.”

The Microloan Foundation makes it a point to treat women not as recipients of charity but as business entrepreneurs who are capable, driven, and self-sufficient; the success we have experienced with our inspiring clients has demonstrated this to be an advantageous approach. Microloan clients continuously prove themselves to be eager to learn, motivated, and dedicated to succeeding in their business aspirations, which is evident from our 99% repayment rate.

The commitment of the MLF team gives hope to these women who otherwise would not have the opportunity to gain financial independence and autonomy. Olivine, who began working with the Microloan Foundation eight years ago, first as a branch office assistant, then as a loan officer and now as a branch manager, shares her thoughts on the organisation:

“My favourite thing about working for Microloan is working with the women, particularly helping them to develop their businesses to improve their lives. When a group is struggling I don’t give up. I keep coming back until they realise I am not going anywhere. I encourage women.”

The future of the Microloan Foundation is a bright one, with aims to expand its work, creating a deeper, more measurable poverty outreach and impact. It has established a set of goals corresponding to each country where we work, consisting of growing its client base in Malawi by 25% over the next three years to reach 420,000 women by 2015, achieving 40% annual growth in Zambia in order to reach 8,000 women in Zambia over the next five years, and providing basic, initial services to 2,000 women in Zimbabwe by 2015. The Microloan Foundation strives to continue delivering maximum support to its clients on their way out of poverty, reach more and more women in the most remote areas who otherwise would not have financial access whilst offering the most beneficial products to meet their needs, and give women a hand up to better their lives and break the cycle of poverty.

Baking can mean different things to different people. For some it is a weekend hobby, others a way to bond with family and friends, and for several people, such as the Microloan Foundation’s baking clients, it is a business. But no matter how baking is used in one’s life, it seems to possess the universal characteristic of providing comfort and nourishment, whether to a household, a community, or simply the baker themselves.

Elina Soko is one of the Microloan Foundation’s baking clients. Twice a week the small hut at the back of her one bedroom mud brick house is transformed into a bakery, where Elina uses a pile of hot coals on the floor in place of an oven to make scones. As modest as it may appear, this small operation has transformed the lives of Elina and her family of six, who live in a small village settlement near Nkhamenya in Malawi. Her first loan cycle was in the amount of 10,000 kwacha, or about £40. She then graduated to a larger loan of 15,000 kwacha, or approximately £60, and finally, by the end of 2011, was on her third loan cycle of 17,000 kwacha, nearly £70.

Having a larger loan means Elina can purchase more flour at a time and benefit from lower costs of buying in bulk. Currently, she buys 10kg bags of flour for around £5, which will eventually earn her a profit of about £12 once sold as scones. Because she only bakes twice a week, Elina has begun to sell dried fish, using a bicycle she paid for with the profits from her baking business to transport her goods to and from the market. The success she has had as an entrepreneur has not gone unrecognized.

Elina was elected Chair of her Microloan group, a role she is very proud of, bearing the responsibility of making the weekly journey to the bank in Kasungu with the group’s repayment money and savings. With the profits from her business, Elina has been able to make life for herself and her family more comfortable. She has bought a waterproof roof and a concrete floor, and is now able to send her two youngest children to school. Next year she hopes to re-plaster the walls of her home and purchase a cow, having already researched the costs and calculated the profits she must earn to afford to do so, about £120-160.

The Microloan Foundation has come a very long way in ten years, with more staff, more branches, and more impoverished women getting a hand up to lift themselves and their families out of poverty. And while we are continuously striving to expand our efforts to reach even more women, we find our current figures to be quite inspiring and a good reason to celebrate!

Every month the London office receives branch reports revealing the statistical reach of our work. At the moment, Microloan employs 160 staff in Zambia and Malawi’s 21 branches, including 91 loan officers. These loan officers are responsible for the 1,668 groups of clients, which are comprised of 24,909 women.

So far this year, 1,713 loans have been distributed to client groups, which means that 26,165 loans have reached individual women. The average size of each loan is around £52, which consistently varies depending on the value of the Kwacha (the monetary unit in the respective countries).

We are also thrilled to report that at this point we have dispersed a greater value of loans than budgeted for, totalling just under £1.1 million. Halfway through its second quarter, the Microloan Foundation is delighted with this success, and excited to see the number of women we can empower by the end of our tenth year.

Part of what makes the Microloan Foundation’s approach to charity different from other microfinance services is that along with the loans we provide to women we also administer in-depth training to instil basic understandings of business to assure that concepts such as saving, profit earning, and repayment are employed and to facilitate financial independence.

As part of the training, Microloan clients learn how to form well-functioning groups and equip themselves with the necessary skills to run a successful business. Rather than providing individual loans, the Microloan Foundation works with groups of 15-20 women who live in the same village. This tactic serves as a form of ‘social collateral’, in which people are generally more likely to respond to a sense of group responsibility, or joint liability, which has positive effects on loan repayment rates. This also generates in-group trust and support.

Once formed, a group will establish its own set of rules to adhere to and have its business ideas reviewed. There are then eight sessions of pre-disbursement training in order to ensure clients are prepared to manage their loans properly. These sessions take place every two weeks, each focusing on a specific topic of business management, such as calculating costs, pricing and profit, savings goals, and market research and lessons on group support. Groups then meet with a Training Officer once every two weeks to review their progress and continue the mentoring process.

Approximately half of the Microloan Foundation’s clients are illiterate. Therefore it was necessary that methods be developed to deliver business and financial training with maximum results. In the past year, Microloan has dedicated itself to improving the model of client training to ensure it is adequately structured and highly participatory. New modules incorporate adult-learning methodologies to provide training that is more comprehensible and engaging to clients and which is more applicable to their lives. Approaches such as role-playing, games, songs, and use of illustrations serve to encourage more interaction and ensure the relevance to clients’ needs and improve knowledge retention.

Social Performance Management (SPM) is an on-going, institutionalised method of improving the quality, effectiveness and efficiency at all levels of an organisation in order to ensure its social mission is fulfilled. In other words, it is a way of perpetually making certain that goals are being met and that the necessary measures are taken to improve the services received by clients. This continual analysis permeates all operational levels of Microloan as a functioning organisation, from research activity and data collection methods to how group meeting are conducted and clients are trained.

At the Microloan Foundation, our mission is to work with the poorest women and enable them and their families to work their way out of poverty. SPM keeps us focused on the most important aspect of our work, our clients, and ensures that we are meeting their needs consistently and with quality, in order to improve their lives. We make sure that the voices of the poorest women are heard. The learning is then invested in improving our programs.

Daniella Hawkins, the Social Performance Manager in the UK Office describes this process:

“Because we’re talking about loans which is debt, we also want to make sure that our clients are protected from harm by giving appropriately sized loans, and having in place policies and systems to ensure our loans are transparent to clients, and that we integrate their feedback into our operations to constantly improve and refine our services in response to client needs.”

An example of this would be adjusting the size of loans distributed depending on the time of year in an attempt to make repayment more manageable and realistic based on the season and expected crop yields. Another instance of this is the introduction of the Chiyambi loan. Chiyambi, which translates to ‘beginning’, was designed to maximise Microloan’s outreach to the poorest of the poor, who may have difficulty accessing the minimum loan of £25. Women who join the Chiyambi program are not under any savings obligations, can access a loan as low as £3.75, and specialised training is given to support those who are illiterate or who have never run their own businesses.

The Microloan Foundation, like other microfinance institutions, has adopted several of the SPM standards from the Grameen Bank, and has used its resources as a basis and starting point for its own aims of operational excellence. One of these resources is the Progress out of Poverty Index, or PPI, which allows Microloan to ensure that we are reaching the very poorest of the poor, and track our clients’ progression out of poverty. In 2010, the Microloan Foundation conducted a survey using the PPI, interviewing 200 clients in two of its branches.

The data recorded determined that of those who participated, 55% lived on less than £1.20 per day and 87% on less than £2 per day. Thus by using this resource, Microloan can be assured that we are helping the most impoverished women, and track their progression out of poverty over the course of their loans.

One element of the PPI is a social assessment questionnaire that is completed by our clients upon entering and exiting the program, which concisely and directly tackles the issues at the heart of poverty by asking questions such as “What general type of construction materials are used for your dwelling,” “What was your main source of drinking water in the past month,” “What is your main source of cooking fuel,” and “Does your household own a lantern?” This form of data collection is just one example of how the Microloan Foundation implements Social Performance Management to improve the delivery of services to our clients and maximise the operational outreach, efficiency, and planned growth to help more women.

This month the Microloan Foundation is pleased to be welcoming a new Social Performance Management Officer, Joseph. Previously a branch manager and part of the Client Training Task Force, Joseph will now be responsible for overseeing the effective distribution of SPM across Malawi and Zambia. This esteemed position is well-deserved, and Microloan is very fortunate to have such a dedicated member to its team.

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