Development Ratings

MicroLoan Malawi lends small sums of money (currently averaging ~£55 in Malawi) to groups of 10 to 18 women to help them build businesses. The groups elect their own Treasurer and Secretary to manage the loans. Each group is given an appraisal of their business idea as well as training. This covers basic business skills (such as book-keeping and cash flow management) and group dynamics (to help them organise themselves effectively). Members must save 20% of the first amount they wish to borrow as a source of security and to show commitment and engender financial planning. At the end of the training, each member of the group receives her loan and opens her own bank account at a local commercial bank. The women then set up small commercial ventures such as farming, fishing or market trading. As groups are collectively responsible for payments, peer group monitoring and pressure serve as the primary mechanisms for ensuring prompt repayment. MicroLoan loan officers administer the loans, each of whom manages up to 20 groups. Each loan group meets every two weeks with their dedicated MicroLoan officer to review the progress of their businesses and make repayments against their loans (with interest and fees). The loan officer counts and checks the payments with the Treasurer, who then deposits the agreed repayment into the bank, leaving a copy of the bank receipt at the MicroLoan office.

Loans are made for a four-month period. A borrower usually receives up to four sequential loans, after which time her business should be commercially viable. MicroLoan has developed a bridging loan programme as further support for women reaching this stage, to bridge the gap between MicroLoan’s starter loan size and commercial bank loans. In addition, the MicroVentures project provides individually tailored financial services, more specific and long-term skills training, and marketing support for the subsequent stage of small business development. This is aimed at particularly promising entrepreneurs amongst the women in the initial groups. These higher levels of support provide an important incentive for clients to maintain good credit relations with MicroLoan. Pilot impact assessment surveys are producing impact data of the financial and social implications of the loans on individuals.