Here is a brief breakdown of the differences between microcredit and savings and lending groups –
Lenders: Non-governmental organizations (NGOs) or small banks provide low-interest loans to small businesses or economic initiatives.
Savings Requirement: None, there is not a requirement to first have a portion of the loan saved up.
Savings and lending groups
Lenders: Local community members or entrepreneurs are the leaders of the group. NGOs often provide seed money to jump start the group and then relinquish their coordination/leadership to the participants.
Savings Requirement: The group members contribute a savings to the pool of money on a weekly or monthly basis. With a percentage of the loan already saved, they then request a low-interest loan for their small businesses or economic initiatives.
In our work with women’s economic empowerment, it is important for us to ensure that we promote a savings and lending group rather than play the role of a microcredit lender. Our expertise is not in micro-finance or banking. Our expertise is in creating programs that help to foster social change in the community, and we believe that community members must be the leaders of such change.
Our Women’s Empowerment Project is now in its third year of operation with its second cohort of entrepreneurs. A select group of entrepreneurs from the first cohort (pictured to the right) are participating in a new savings and lending group that Programa Velasco is jump-starting. The group will administer $1,000 in seed money earned from grant funding. After two years of business administration training and personal formation work, the entrepreneurs are more equipped to run their business and this group. Their participation in the savings and lending group will provide them with ongoing support and access to credit so they can regularly invest in their businesses and, in turn, in themselves and their families.
We appreciate their examples of dedication and leadership. They are making a difference in their community and families. We look forward to sharing more about what they will accomplish as a unified group!