Beyond Microfinance

Posted 1:46 PM by Internal Voices in Labels:
Karinna Berrospi, UNIC Washington DC

Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.
Chinese Proverb
The idea of micro financing was based on a wish to empower poor women instead of securing their survival by offering them hand-out after hand-out. Through microfinance the women are supposed to gain access to credit, which enables them to make their own money. This is looked upon as an empowering process, a homegrown solution which began with the arguments of Economist Muhammad Yunus. His idea was to develop lines of credit for the poor; a model to learn how to respond to the needs of people, instead of imposing a top-down formula of development. In this new development model the first step for aid workers is to learn about how one can be a good listener, and take the time to learn about people’s needs and expectations. Like economist William Easterly said, we need to “treat them [the poor] like a client.”
LACK OF ACCESS. The idea of microfinance has been highly applauded. Still, the expansion of microfinancing projects in the Least Developed Countries (LDCs) has been slow. It is also in these countries that financing projects are most needed. Therefore, the UN focused its attention to the LDCs by launching Microlead, a microfinance Fund for LDC, in November 2008. A recent study by the United Nations Capital Development Fund (UNCDF) has found that, “Despite the rapid growth of the microfinance industry in the past ten years, it is estimated that between two and three billion people still lack access to a broad range of financial products and services on a sustainable basis.”  
CLOTHING BANK. In non-LDC countries, however, where there seems to be more access to finance, alternative ways to microfinance are emerging. This is the case of the Clothing Bank in South Africa, whose vision is to “empower unemployed mothers through enterprise development”. Their objective of making women financially and socially independent is similar to that of microfinance. To achieve this, the Clothing Bank has come up with a systematic approach. They COLLECT – new and second-hand clothing then REPAIR – items or sometimes remodel them, SORT clothing into different categories, and DISTRIBUTE it to non profitable organizations, government departments and welfare institutions.
Finally the Clothing Bank has an Enterprise Development Program, which allows women who have participated in the process to buy clothes and resell them to their communities in order to make a profit. The Clothing Bank portrays itself as a facilitator, as money is not coming to them but it is going to the women.
UNUSED POTENTIAL. In South Africa there is an excess of clothing, estimated at a value of R450-R900 million per annum (46 to 92 million Euros). This means that the full value of garments is not used. At the same time, clothes are being shipped to South Africa from developed countries. The Clothing Bank’s model to empower women is similar to microfinance in the sense that it uses small amounts of capital to finance the beginning stages of self-employment. But it has a different local flavor to it. At the Clothing Bank workers are not taught entrepreneur skills, or how to create unique business ideas, instead they are taught trading skills. This is an interesting fact in a country that is mostly looked upon as a crafter nation, not a trading nation.
EXPORTING IDEAS. Most NGOs teach people how to make something, but not how to sell it. The Clothing Banks approach is the opposite. It is yet to be explored if this model works in other contexts and other cultures, but the model’s potential should be explored: Can this be a contribution on the road to achieving the United Nations Millennium Development Goals (UN MDGs), and in particular the goals of ending poverty and hunger, increasing universal access to education, and improving health services? The idea of the Clothing Bank is based on thorough knowledge of the South African society’s needs and demands. Therefore one question remains: Can this idea be exported and applied to other countries?

1 comment(s) to... “Beyond Microfinance”


Anonymous said...

great work Karinna! Wonderful insight on microfinance and its constraints

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