Microfinance as an Avenue to Achieve Economic Justice
by Melissa Hinnen
Microfinance was one of the ways to address the needs of those living in poverty at a conversation on ministry with the poor sponsored by the United Methodist General Board of Global Ministries on December 16. Held in New York City at the United Methodist Church of the Village, more than 500 people joined in from around the world via a live webcast. An overview of the meeting and a link to the download of the webcast can be found here: Microcredit, Restorative Justice.
A diverse panel discussed the role of microfinance in terms of economic justice. Donna Katzin of Shared Interest said that microcredit "is not giving--it is restoring the right to sustain families and reclaim the lives and power that is theirs."
Shared Interest is a community development institution in South Africa that was established in 1994 to address issues of apartheid by using finance as a tool to mobilize communities and give direction to those in need. Katzin shared the story of a woman named Grace, who lives in a small village just south of Zimbabwe.
Grace was widowed at 42 years old, with five children. She took out a small loan and used the money to buy convenience items that she sold for a small profit. She paid back the loan and was able to save money for bricks to build a store. Through the store's success, Grace employed three people in her community.
With another loan, she purchased a vehicle to take her children to school. Now she uses the minivan as a transportation service to take other people's children to school. Grace later said that Shared Interest saved her life.
Grameen Bank as a Model for Successful Microfinance
Bishop Roy Sano, a retired bishop, proposed a shift in the mission of The United Methodist Church. Rather than "making disciples of Christ for the transformation of the world," he suggested that by "seeking to transform the world, we will make disciples of Jesus Christ."
He made the case that microfinance is a successful tool that sets a foundation supporting the four foci of The United Methodist Church: ministry with the poor, new spaces for new communities, global health, and principled leadership. As an example of the holistic value of microfinance, Sano outlined the work of Muhommad Yunus, who was awarded the 2001 Nobel Peace Prize for his use of microcredit to empower people living in poverty in Bangladesh.
According to Sano, the three factors for the success of Yunus' Grameen Bank were its focus on women, a holistic approach, and field work. Sano commented that studies show women are more likely than men to invest profits back into their families and communities. Grameen Bank makes 97% of its loans to women. The loans are shared in friendship circles of five to seven women, increasing accountability. According to Sano, the loans help build women leaders--two women eventually became candidates for Prime Minister. The second success factor is a holistic approach. The program was committed to 16 program areas, including building wells, homes, and gardens; and promoting nutrition, health and education.
Finally, reaching out to people in the field, the program promoted integrity and self-care. Through careful planning, motivated workers were trained in reading and math, furthering their education and strengthening the community. The investments in Grameen Bank eventually grew to allow pensions, savings, and insurance benefiting more than 7 million people who were living in poverty.
Teaching Women to Live Outside of the Loan
Marva Usher-Kerr, an executive of the Women's Division, Global Ministries, explained the importance of partnering with the people who already know the systems and circumstances in place. Her division has 300 international projects and partners. She shared photos and stories of successful projects and cooperatives where women sew bags, make hats, produce and package chocolate, dye clothing, and make soap.
According to Usher-Kerr, when a microloan is not paid back or a project fails, it is usually because of an external situation such as the death of a husband. She emphasized the need to educate women to adjust to changing circumstances, including greater access to financing. As that happens, the culture shifts and the women feel empowered to succeed as a community.
According to a 2007 United Nations report on the status of children, a child's path is deeply affected by his/her mother's circumstance. By teaching women to be self-sufficient and helping them out of poverty, the generations to come will have an established path to follow.
NGOs Providing Business Development Support
Thomas Dwyer, director of the nongovernmental organization (NGO) linked to the United Methodist Committee on Relief (UMCOR), discussed UMCOR's 70 years of relief work, development, and the organization's involvement during the microfinance evolution, including its participation in the first microcredit summit in 1999.
UMCOR has been involved in the "passing on the gift" model, as utilized by the Heifer Project, where beneficiaries are committed to sharing the profit of their loan with others in their community. According to Dwyer, "Sometimes all that is needed are the inputs," such as in agricultural or emergency income-generation kits.
Another successful model has been to provide group loans through microfinance institutions like AREGAK. Founded in 1997 by UMCOR Armenia, AREGAK makes small loans to low-income people, people living in remote areas, and women-owned small businesses that create economic opportunities. In April 2006, AREGAK became independent--but still receives support--from UMCOR.
UMCOR has moved away from being a direct lender but has found value-added synergy by working with established microfinance institutions to provide the support necessary to make the loans successful. Dwyer advocated fully leveraging the church to remain focused on the entrepreneurial poor, continuing collaboration with and scaling up the operations of existing microfinance institutions, and providing business development services and financial management guidance to ensure the upward mobilization of those participating.
Strategically Addressing the Economic System
Chris Ferguson, of the World Council of Churches added his "ecumenical footnote to the vision of The United Methodist Church" in three contexts: the current interlocking world crisis, Jesus' approach to breaking down economic slavery, and taking on powers and principalities that continue to keep the poor from becoming upwardly mobile.
Ferguson suggested options that empower communities, including educating girls--programs that have the same impact as microfinance without investing in programs that keep people in debt. According to him, microfinance will not end world poverty because it is part of the economic system that is designed to benefit only a few at the top of the pyramid.
Successful empowerment creates economic justice and builds a critical mass with other organizations. Without this strategy, according to Ferguson, microfinance is part of the problem that encourages small borrowers to borrow from six or seven lenders, deepening their debt.
He outlined a number of organizations that integrate strategies for economic justice through microfinance, including Oiko Credit and Ecumenical Loan Fund (EcLoF). He challenged churches to be models of economic justice by investing funds that yield no more than a 2 percent return. Said Ferguson, "Anything more than that is not ethical."
Melissa Hinnen is the director of communications for the United Methodist Committee on Relief.
Date posted: Dec 21, 2009