How can small loans be managed to assist poor people improve their lives?

Define · Locate · Select · Organise · Present · Evaluate Define the task The Scenario: Setting up a microfinance co-operative Poor people often live from day to day and do not have spare money to pay for big expenses such as school fees, medical bills or house repairs. By using a grant and pooling your resources with others you want to take advantage of small loans which are available to help you to buy materials for running a business. Background Microfinance assists people to develop a small business and generate a liveable income through saving schemes which have low management fees and loans with low interest repayments. Banks and credit unions need to make money to pay for staff who keep the accounts and to cover losses when people do not repay their loans. Through this Global Learning Quest you will experience being part of a microfinance cooperative and consider your response to the global question: How can small loans be managed to assist poor people improve their lives? Perspectives on the Global Question Form teams of four or five to develop your own microenterprise business plan. Microfinance Cooperative A microfinance cooperative is a group that offers small loans to poor people so they can generate an income and help themselves out of poverty. They receive some money from aid organisations and the savings of members of the cooperative. Their costs might consist of salaries for people managing the loans and rental and power costs for the building they operate from. Many of the poor people they deal with have limited business skills and some cannot read, write or keep records of their costs and income. Many of their borrowers need assistance to access a wider market for their hard work to really pay. A microfinance cooperative will need to develop some guidelines for the allocation of loans in order to decide which business plans they will approve. Microenterprise developers These people earn a tiny income from a small business (eg fishing, making soap and herbal medicines, sewing clothes, making household goods from tin, or driving a pedicab/taxi etc). With a loan they can plan to expand their business and increase their income. They need to consider their costs and develop their ideas for increasing their business. They will have to present a business plan to the Microfinance Cooperative for approval.

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Select information Focus questions Background information What is microfinance? Who is eligible for a microcredit loan? What happens when a borrower cannot repay their loan? What support is needed to assist people to develop a small business? Microfinance Cooperative How will you generate capital (savings, grants, loan)? Who will you lend money to (proven savers, profitable businesses, people in difficulty, women/men...)? How much money will you lend to a borrower at one time? What repayments (rate of interest, length of time for repayment) will you expect? How will you guard against too many people defaulting on a loan? What support will you provide to your borrowers (training, extension of loan, reduced interest rates...)? Microenterprise developers How will you develop your microenterprise? What resources do you have (people, knowledge, raw materials, time, money)? What problems might prevent you from producing your goods and how will you overcome these? How much will you need to borrow? How you will repay the loan? Organise Find out how a microfinance cooperative works by using resourceson this website and in your library and community. Discuss possible businesses you could carry out and whether funding and time are available to undertake their development. Form small groups of three - four people. One group will become the Microfinance Cooperative and the others will become Microenterprise developers. Each Microenterprise group will decide on a small money making business. They will develop a business proposal that they could implement, and submit an application to the Microfinance Cooperative in the agreed format and timeframe. The Microfinance Cooperative team will develop funding guidelines for the assessment of the business plans. After the plans have been presented your team will need to consider the proposals and decide how to use its available funds. Contracts are drawn up with the successful groups and money allocated. Implement the enterprise activities, report back to the cooperative in the agreed format and repay your loan on the due date. Present After group presentations and the allocation of funds by the Microfinance Cooperative - discuss a collective response to the global question. How can small loans be managed to assist poor people improve their lives? As a whole group, negotiate a general response to the global question which takes account of the different ideas presented by the various teams. Some options include (but are not limited to): Listing questions and interviewing a representative from an organisation which offers small loans Letter to the Australian government about its support for microcredit and poverty reduction through its aid program Letter to the editor of a newspaper reporting the effectiveness of microfinance to reduce poverty - locally/community/nationally. Evaluate Individually and as a team reflect on what you have learned about microfinance and how small loans can help people earn a better income. Also reflect how you have worked with each other as members of a team to complete the project.   High Medium Low Collecting information       Ability to gather relevant information I used a large number of appropriate resources to gather information that was important and related to the questions I used a variety of resources and collected information that was generally useful I used ony one or two resources and did not select the key points to answer the questions Ability to use information to support a particular perspective I developed an understanding of a particular point of view about the issue and support this well with information gathered I presented a key aspect of a particular point of view about the issue and provided some information to support it I formed an opinion with only limited use of the information gathered Working as a team       Ability to work with others in a group I listened carefully to others, shared own information and supported others to express their point of view and keep the group working together well I listened to others and made some comments to support the group to work together I listened to some people but did not always encourage others to contribute their ideas Presenting information       Ability to present information with rationale I presented the key points with supportive evidence I supported the key points with some evidence I presented some key points in a short manner Taking action       Ability to apply learning by commenting on the value of microfinance I can explain microfinance and question the accuracy of information I can explain microfinance I can ask questions about microfinance

Learning outcome : Teams will investigate aspects of running a small business, allocating grants and repaying a small loan.   Learning Areas: Studies of society and environment, Economics, English, Mathematics   Year levels: Upper primary   Duration: Minimum of four 45 minute lessons   Tools needed: Access to a library, Internet; markers and paper. If real businesses are developed then funding would also be necessary.