Credit where it’s due: the Christmas gift of microfinance

Agnes Phiri isn’t looking for charity. The 24-year-old mother-of-one runs a grocery store in Katete, eastern Zambia. Although Zambia is the poorest country in the world – it has a frightening 86 per cent poverty rate – Phiri herself isn’t facing starvation. She is almost 3,000 miles from west Africa and is about as at risk from Ebola as we are.

She, like millions of other entrepreneurs across the world’s economically fastest-growing continent, is seeking capital to buy her goods in bulk and cut down overheads.

The amount of the loan? It’s €140. I haven’t left out any zeroes.

It seems the greatest gift Phiri will get this year is microfinance. And her lender isn’t the UN, the Zambian government, the Bank of Zambia or the thousands of charities doing Trojan work across this vast continent, but a 73-year-old self-employed small businessman in Drogheda.

Along with other small lenders around the world, Bill Southard contributed to Phiri's loan through Care International's Lendwithcare initiative. With 40 years' experience, Southard knows a thing or two about running a small business, and he says the biggest challenge is access to capital. "I got drawn to the message and was touched by the content, so I decided to take part. It is a practical way to help without it being seen as charity. I feel very pleased. I'm sure the effects are immeasurable."

From the increased turnover, Phiri hopes to be able to educate her child and employ a part-time helper. She is one of 17 entrepreneurs who have benefited from Southard's credit, from countries including Pakistan, Vietnam, Cambodia, Zambia, Togo, Benin and the Philippines. We don't discuss the amounts, but the minimum loan with Care International is €19.

While allowing someone to operate as a small bank to those in developing countries might not rank highly on most people’s traditional Christmas shopping list, Care International is offering, as stocking fillers, microfinance gift vouchers.

With the original Christian meaning of the festive period largely faded in modern Ireland, the alternative – consumerist offerings at the altar of growth to commemorate the birth of our saviour, Capitalism – rings hollow for many. In this context, the idea of investing in the developing world holds an attraction.

Like sponsor-a-child programmes, the model, in which money is transferred directly to the accounts of people on low incomes who don’t normally have access to banking, is also more conducive to transparency than traditional fundraising, which has become unfairly tainted in this country by the top-up controversy.

Less patronising “A system like this is less patronising and far more positive than handouts,” says another lender, Padraig Fanning. Last Christmas, he used a microfinance voucher from his son

Michael to lend to Dinh Thi Hoa, a 37-year-old small farmer in Hoa Binh, Vietnam. Hoa and her husband produce and sell maize and rice from a one-acre holding. They requested a €450 loan to replace their three cows, which they plan to sell to pay tuition fees for their two children, and to repair storm damage.

Fanning is effusive about the system. “I feel very positive about the whole thing. The idea of helping individuals appeals to me.”

Although it is nothing new in Ireland, where credit unions have provided small loans for 50 years, microfinance came to prominence in the developing world 20 years ago through Nobel laureate Muhammad Yunus. The idea of entrepreneurial people lifting themselves out of poverty through small loans remains compelling – not least through the prism of the western work ethic – yet it seems the system remains open to abuse.

A recent Brooks World Poverty Report into microfinance institutions in Bangladesh, for example, reported instances of very aggressive tactics by loan officers charged with recouping monies. Dr Ajaz Ahmed Khan, senior microfinance adviser with Care International, is open about the problems of unregulated microfinance institutions, and says that their proliferation has resulted in a spectrum of lenders, ranging from charities and farmers' co-ops to those with explicit profit-making motives.

Care International ensures its partners adhere to client-protection principles. “We reject applications in instances in which the borrower is unlikely to be able to generate a profit and repay the loan,” says Khan. “When borrowers do experience repayment difficulties, which some invariably do, they tend to restructure loans.

“The aggressive collection practices employed by some loan officers from Bangladesh to coerce repayment are, thankfully, relatively rare.”

Longstanding poverty

The Brooks report also cautions that delivering microcredit to the poor may not tackle longstanding poverty. This is one reason why some charities focus on upskilling entrepreneurs.

At the higher end of the ethical gifts and vouchers offered by Plan Ireland this Christmas, for example, is a €1,000-worth of “micro-enterprise” training for female entrepreneurs in Sri Lanka. The women will receive training in marketing, financial literacy, small business planning, computer literacy and value chains.

In February, Plan will launch its second Women's Innovation Fund, with Cherie Blair one of those expected to take part. Last February it invited 250 Irish businesswomen to its first Women's Innovation Fund, which raised €50,000 to train 250 women in Sierra Leone.

“I think it’s a long-term investment,” says Ena Prosser, a small donor. “Small interventions can make small differences to individual families, which can grow into big changes for their communities.”

“Our investment makes sure they get all their ducks in a row,” says Plan spokesman Mike Mansfield. “One can get in and financially invest in a group of women with a loan, but that’s not really the model that we follow. We prefer to create an environment to allow [them to] improve and become financially and economically viable businesswomen. A lot of the women would be in their early 20s-30s who lost out on education. Some will have some enterprise on the go, and what we’re doing is to grow that by helping them open up new markets.”

Likewise, one of Trócaire's 2014 Christmas gifts is Supporting Women in Business, which costs €250 and offers training in business skills to women in Ethiopia.

Other people might prefer the direct method of microfinance. Haydn Price (48), a producer from Wicklow, contributed to a €1,700 loan to Melania Del Carmen Garcia Valdez, a tailor near Catamayo, Ecuador. The 52-year-old widow will use it to pay for a new sewing machine and roof repairs.

“It has taught me about the lives of others and the places they live,” says Price. “The idea that we can all help get projects started so quickly is wonderful.”

Although they differ in their chosen methods, the sponsors to these projects all share one thing in common: the complete absence of buyer’s remorse.

lendwithcare.org/gifts, plan.ie/christmas, trocaire.org