Like many people in developing countries, Neriman works hard to provide basic needs like food and shelter for her family.
The soft-spoken mother of nine lives in rural Turkey, where the average annual income is less than $20,000. Neriman wanted to work to support her husband, and had thought about borrowing money to provide her with a way to earn an income, but she didn’t have the credit history or collateral to be approved by a traditional bank.
“When I thought about applying, I was told that banks did not give anything to those without an income,” she recalls.
Microloans serve those excluded by traditional banks
“Being self-reliant, that is what I am most proud of.”
Neriman heard from a friend that she might be able to get a loan through Kiva lending partner Turkish Grameen Microfinance Program (TGMP), a non-profit organization that offers financial services to low-income women and others excluded from traditional banking systems. Neriman applied for and received a microloan that allowed her to buy a cow, which she milked to feed her children. It also provided her with a means to earn an income.
With the proceeds from the milk and yogurt she sold, she was able to pay off the loan and then to buy more livestock, and now she and her husband oversee an animal husbandry business that supports the family. Most recently they were able to pay for their son's wedding, which gave them much joy.
“After receiving the credit, my life changed. I know that I have a job,” Neriman says with a small smile. “Being self-reliant, that is what I am most proud of.”
Through Kiva’s platform and community of lenders, TGMP has made more than 1,100 loans and dispersed almost USD$500K to Turkish women as well as Syrian refugees who have fled their home country and settled in Turkey. These and other microfinance institutions (MFIs) around the world provide loans, savings accounts, insurance, education and other services to underserved individuals in developing countries.
How does microfinance help the poor?
Systemic poverty must be addressed on multiple fronts. While financial exclusion and lack of access to credit and capital are part of the problem, global poverty intersects with many factors that affect people and communities, including:
- Political conflict
- Food insecurity and lack of clean drinking water
- Poor healthcare systems
- Lack of access to education
- Cultural marginalization, particularly for women
- Environmental issues, including climate change
While there are many initiatives that can and should work on addressing these factors, microfinance is one way to directly help people improve their lives, and often intersects with many of these issues. For example, loans to refugees and internally displaced persons help individuals who have been displaced due to political conflict start a new life in places where they don’t have access to traditional banking. Loans that support water and sanitation projects help individuals improve their family’s living conditions. And loans for education help people build a better future for themselves.
Small loans offered by MFIs not only help individuals start businesses, fund their education, or manage a medical emergency, they also give borrowers a chance to establish a credit history, which can help them to access more capital from traditional institutions in future. Access to these services and tools that aid and sustain financial independence is the crux of financial inclusion.
And it can make a big impact.
87 percent of borrowers who participated in a survey reported that their quality of life “very much improved”.
In Kenya, 87 percent of borrowers who participated in a survey reported that their quality of life “very much improved” after working with ECLOF, an MFI and Kiva lending partner that has lent over USD $6 million to entrepreneurs, farmers, and students. Ninety-one percent of those surveyed said they had “no alternative” to the financial services provided by ECLOF, and 82 percent their ability to save money had also “very much improved.”
There are also impressive outcomes for the customers of another longtime lending partner, One Acre Fund, an agriculture-focused organization that works with farmers in South and Eastern Africa. Their robust evaluations have found that because of One Acre Fund's loans and training services, their farmers increase their annual incomes by 34% to 53% depending on the year. Their program helps farmers to increase their crop yields through improved farming inputs and farming techniques. One study showed that their maize farmers in Kenya increased their harvest by an additional 274 kg per farmer when compared to a control group.
Addressing environmental challenges in developing countries
Microfinance can also facilitate solutions to environmental issues in developing countries. Loans that help farmers adapt to changes in weather conditions support those who are already disproportionately suffering from the impacts of climate change.
Other loans help individuals mitigate their contribution to environmental degradation through things like access to renewable energy sources. In underdeveloped communities without access to electrical grids, many people cook over open fires that burn firewood or coal, which is not only expensive but pollutes the air and makes them sick. The World Health Organization reports that more than 3.2 million people die prematurely every year from household pollution associated with inefficient cooking practices.
African Clean Energy (ACE), a Kiva lending partner based in the sub-Saharan country of Lesotho, aims to provide an affordable solution to this problem by offering microloans for its clean cookstoves. The stoves use up to 85 percent less fuel than traditional stoves and produce almost no dangerous smoke. They’re also outfitted with a small solar panel that charges phones and powers the included LED light, further reducing household costs and pollution.
By providing credit to borrowers like Thach, who lives in a traditional hut in rural Cambodia, ACE helps improve lives by improving people’s health, preserving their resources, and bringing them light.
“When I use the new stove, it saves me a significant amount of money,” says Thach. “The reason I want people to use this stove is it saves on expenses, cooks quicker, and reduces smoke.”
What impact does Kiva have in developing countries?
Since 2006, Kiva has lent over USD $1.6 billion to more than 4.1 million borrowers in 77 countries. Many of these borrowers live in places where the effects of poverty are compounded by other factors, as evidenced by the following breakdown:
- 81 percent are women
- 56 live in rural areas
- 8 percent live in areas with active conflict
The majority of borrowers live in Africa, Asia, and South America, where many people live in poverty or lack access to financial services.
Funded by Kiva lenders, here are the countries that have received the most loans:
The types of loans vary from educational to entrepreneurial, though agricultural sector loans make up the greatest percentage at 26 percent.
For Mutasem, who lives in the West Bank village of Jenin, an agricultural loan helped him buy the tools he needed to till his farm and buy more livestock to support his family of seven. He was able to secure credit from Kiva lending partner FATEN, which allowed him to expand his production of cheese and yogurt, which he sells at the local market.
“My business has become bigger with the help of FATEN,” he says. “They treat us respectfully, they don’t put a lot of pressure on their borrowers.”
Microfinance continues to improve lives
Microfinance can be a tool to help those without access to financial services access the resources they need to start or expand small businesses and build better lives for their families.
Kiva lenders make an impact every day with every loan, helping to further our mission of financial inclusion for all.