Loans build new lives in rural Malawi
28 September 2007
It can be hard to earn your way out of poverty without access to bank accounts
or loans. Setting up a small business, and keeping it going, requires these
basic financial services, but 2 billion people worldwide go without such
essentials.
In Malawi, a DFID-backed organisation is equipping rural dwellers with the means
to turn a profit for themselves.
Concern Universal Microfinance Operations (CUMO)
currently provides around 20,000 villagers with savings accounts, small loans
and a framework in which to build successful enterprises. Established in 2000,
and receiving £2.5 million of DFID funding between 2003 and 2007, CUMO's work has
helped to alleviate poverty in some of Malawi's most excluded communities, and
had knock-on effects in reducing hunger and improving health and education.
Communities coming together
The CUMO approach is all about creating partnerships and making use of
collective expertise. Loan seekers come together in groups of ten to 20,
regularly pooling their savings to make small, interest-bearing loans to their
members. CUMO then opens bank accounts for them and lends money for farming and other income-generating activities.
The emphasis is on empowering villagers to take charge of their own futures, with groups selecting their own members, governing themselves and guaranteeing each other's loans. To equip them for this, participants undergo six weeks' training in group dynamics, bookkeeping and entrepreneurship skills.
Most members of the groups are smallholder farmers, artisans or petty traders. Their first loans are around Malawian Kwacha (MK) 5,000, building to a maximum of MK200,000. Including women is a priority, with membership 80% female, and CUMO also strives to accommodate disabled members. Fortnightly or monthly meetings provide an opportunity to catch up on progress, repay loans (in the last five years repayment rates have averaged 98%), and pick up advice from an attending CUMO representative. To save on costs, meetings take place at local schools, mosques and churches, or under trees.
Loans create income
Mai Rose Chandilanga is one of the many women who have benefited from CUMO help. A widow with four dependents, she joined in 2004 and has taken five loans ranging from an initial MK3,000 to MK9,000 most recently. The first small loan helped her develop her mandazi (doughnut) business, increasing sales from 2kg per week to 10kg. While the money is used primarily for her business, Mai Rose also puts some towards her daughter’s secondary school fees.
Life also improved for Beatrice Sandramu after she took her first CUMO loan. Before, with her husband not working, the family was reliant on casual labour for any income, and they lacked many necessities. Now, having taken five loans since 2004, she has been able to buy fertiliser to cultivate more of her land. The profits have allowed her to buy essentials like soap, salt, matches and paraffin, and to send her children to the local private hospital when they fall ill.
Delivering results
Recent studies have shown that CUMO really is making a difference. The
World Bank has found that the children of
people receiving CUMO loans are better educated than before, and assessments of
the programme in 2004, 2005 and 2006 showed that CUMO clients had better access
to food and transport (and so to health centres) than non-clients.
Thanks to CUMO bank accounts and loans, and the pool of expertise that the programme makes available, many poor villagers are now equipped to become profitably self-employed. For Malawi, this is a new approach to expanding financial services and tackling rural poverty - and one that has delivered very real results.
Key facts
- Concern Universal Microfinance Operations (CUMO) is a non-profit rural financial institution established in 2000 by Concern Universal, a United Kingdom registered non-governmental organisation (NGO). It is currently operating in seven districts of Malawi serving about 20,000 clients.
- DFID has provided about £2,500,000 for 5 years (2003-2007) for this project, the goal of which is to develop an inclusive, viable and rural microfinance model capable of being scaled up to meet the diverse financial needs of remote communities, as part of efforts to alleviate poverty. The services of CUMO complement the works of DFID in Malawi in three strategic areas: hunger, health and education.
- CUMO is an active member of the Malawi Microfinance Network and funds a range of small scale enterprises, namely farm inputs, off-farm micro-enterprise loans, funeral benefits micro-insurance and entrepreneurship training.
- Since 2000 CUMO has provided loans to more than 100,000 clients and positively impacted about 500,000 children of poor families. A 2006 impact assessment by the
- CUMO has strategic alliances and partnerships with
