With the busy Christmas period just beginning, branches of microfinance institutions across the country are gearing up to meet the demand for loans to uplift the productive poor.
Microfinance enables those who have skills but low incomes to develop and grow their businesses. The majority of those borrowing money from microfinance institutions are women, and are often petty traders who form groups to borrow money together. Each member of the group guarantees the next member. In this way, with group members putting forward some small funds as collateral.
This group system of lending means that microfinance can operate without the need for things like houses or other traditional collateral to secure the loans.
For this reason, microfinance reaches out to those who would otherwise not be able to get a loan from the traditional banks.
Prominent microfinance institution like Finance Salone has been doing a marvelous job. One of its clients, Fatmata Kamara, started out selling cloth from a stall in the street. She now has a shop and travels to The Gambia and Guinea to buy materials.
Fatmata said, “If I hadn’t got the loan I wouldn’t have been able to expand the business. As I expand I was able to travel. Finance Salone helped me with business skills. For instance, Finance Salone taught me that every day I should write down all the things that I sell so that I can keep track. I like Finance Salone because the officers encourage us; at times we go for workshops to be shown how to manage our money. From the sales in this shop I have paid my children’s school fees and now I have two at the university.”
The chair of the Sierra Leone Association of Microfinance Institutions (SLAMFI), SD Kanu explained that, “Microfinance is a positive way to reduce poverty because it helps people to help themselves.”
“Microfinance is not a hand out that makes people dependent, it’s a commercial loan to help those with business skills and talent to really develop themselves,” he explained
“Many of those who borrow money are illiterates and don’t own a house or houses, or any real assets, but they have skills that make them, for example, excellent traders, fishermen, hairdressers; professional in the business domain,” Mr Kanu explained. “If someone repays a loan on time, they can get another, and another until gradually, they have a flourishing business,” he said.