Steamboat Rotary's participation in microcredit in Malawi makes a sustained difference

In 1993 the Steamboat Rotary Club donated $5,000 to Rotary District 5440 Project to participate in a humanitarian project assist in setting up village banks   “Micro Enterprise” projects throughout Malawi. The District over all committed to donate $100,000  to assist FINCA (Foundation for International Community Assistance) to set up 10 banks in the country.  This amount was needed in order to have a full time representative in Malawi to oversee the setting up of the banks. The district raised 50,000 including our contribution plus funds from 10 other clubs  and received a matching grant for $50,000 to reach the goal of $100,000 and those funds were forwarded to FINCA. The 100,000 FINCA received from Rotary then made FINCA eligible for a 1,000,000 million grant from USAID and a $75,000 grant from  World Bank. It took a year for FINCA to become a legal entity in Malawi. Ten Rotary village banks were then  established which allowed a representative of FINCA to reside in Malawi and oversee the operations of the banks to loan small amount of funds to individuals to start up small enterprises to earn funds for food and clothing.

 As of this date 1,124 banks have been established in Malawi with a total of 18,841 participants, 86% of which are women. There is presently a total of $1,877,583 out on loan. The average loan per participant is $155 . The on time repayment is 90%.  The ten banks with 300 participants that Rotary donated funds for back in 1993 has been parlayed into funding adequate to start 1,124 banks with 18,841 participants, 86% fo which are women. None of this would have happened had Rotary District 5440 not made the original $100,000 donation.

 A FINCA village bank has approximately 30 members. Loans to bank members are made on a three month cycle with an initial loan amount of approximately $100. Although a $100 loan is not much by our standards, it is a significant amount in country like Malawi where the annual per capita income is only $600. Each member pledges to make good not only on their loan but also on the loan of any other member. This “peer pressure” is the secret of the success in FINCA banks and readily explains why FINCA has a high percent loan repayment.

 Every participant is required to attend two indoctrination meetings before any loans are made. These meetings instill into the participants the fact that the loan is being made to the participant only for the sole purpose of starting a small business and that the loan  is not to be used for any other purpose. When the initial loan is made, each participant announces to the other bank members how the loan will be used. The borrower repays principle, interest, and a savings amount. At the next loan cycle the bank participant can borrow the original $100 plus the savings amount. The participant graduates from the program once she has accumulate $500 in savings. Savings to date for all particpants totals $998,755. The savings in $500 provides capital to start a new business after graduating from the program.

 There are 15 Malawian staff members running the program. The most amazing thing is that since interest earned on the loans to pay all the employees, the program is now entirely self-sustaning. The entire $100,000 donated by our Rotary District 5440, including Steamboat Springs Rotary contribution of  $5000 is still intact and is being recycled over and over again to continue making loans to present and future participants.   PDG Jack Morrison 88-89 5440