Mary, a single mother of one, comes from a community in the South-Western part of Nigeria. One day, she heard of a promising opportunity to get a small loan that she can use to grow her small business. She felt this is a good opportunity as the organization giving out the loan is not requesting any document and at 5% interest, it sounded like a good deal. She was pleased to know that some people are thinking about women like her. In other places she has heard of the interest rate is from 10–40%.
Mary then went to the organization to show her interest in being a recipient of the loan. She was told that for this she would have to be a part of 3 days training with other women in the community. She agreed to this with strong hopes that this opportunity would change her life.
After 2 weeks, she was formally invited for the training and she attended. At the center, she was surprised to see 100 women who all had joined for the same training. They were taught about business management, savings, what kind of business they can do within the community, and what opportunities are all available. They were also introduced to the concept of trust groups. By this, the women are given the loans in groups and if any member of the group fails to pay back, no member of the group will have access to another loan. This will be an accountability system for women. Mary became scared and asked the facilitator- “What if I am in a group with people who live far from me? How do we do a follow-up to ensure they payback?
The facilitator informed her that all women will be put in groups based on their location and how close they are to each other. This made her smile again. So, at the end of the third day of training, she was introduced to her team members. It was a group of 10 women who lived close to her. This group had a leader who was responsible for collecting all the money on a weekly base and delivering it to the account officer within the organization. Everything looked highly organized.
Mary received a loan of N20,000 together with a group of women. All the women in her group received N20,000 with the hope that after 6 months if they all refund the money, each woman will qualify for another loan of N30,000. She is expected to pay back N21,000 at the end of the 6 months loan period.
Mary with joy in her heart went home feeling determined to put the money into her business. She thought in her mind- “with this money, I will change my life”. The next day came, she rushed to the city with N10,000 out of the money to get medicine to stock her medicine shop. She was sure that people will always come to buy from her, and that people will always be sick. The day went well, she arranged the new stock in her shop and told her friends about it so they can tell other people in the community that she has all the basic medicine they need.
The next day early in the morning she went into another farming community to get fruits. She believed that this was a good business because she had ventured into it in the past. She got bananas, pineapple, and oranges, returned to her shop, and arranged it beautifully to draw attention. Some people came by to buy from her. This made her day.
The first and second months went well, she was able to pay back the money due for the month from her fruit business. Then came the third month, where everything changed. She was not making good sales as she used to and was yet to make her profit from the medicine store. She had a daughter to take care of. She took the little money she made from the medicine store to buy food for the house and basic needs. At the end of the month, she did not make much, hence she could not raise enough money to pay back the loan that month. She then went to another friend of hers to get a little loan to pay back. This same incidence recurred from the fourth to the sixth month.
At this point, she began to regret her decision to get a loan. Now she has an additional loan to deal with and her business is not doing well. With the little money raised, she needed to take care of her family. Her daily trauma became how she will pay back the money she is owing to her friend. She fell back to poverty from having something she could call hers before getting the loan. The loan was good fortune for a few months, but she could not sustain the business, she did not get further training as the organization that gave her the loan was only interested now in the payback. She felt alone mostly during the journey to paying back. Her business did not work out because many women took to selling fruits with their loans and because of too much supply and not sufficient demand, the business got worse over time.
Currently, Mary is doing some menial jobs added to the sale of fruits to pay back the loan she got from a friend.
The question now is does Microfinance really alleviate poverty? This is only one among the many stories of microfinance I have heard recently. I would like to read from you about what you think.
