Microfinance Learning Quest: Define

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.

A four month month training course in Lao PDR funded by Australia teaches young women sewing techniques which helps them to find jobs in the clothing industry. John Rodsted/AusAID