In the first week of February, Sethu and I were on a field visit to Sri Lanka that was organized by Berendina Micro Finance Institution (BMI) and UnitedProsperity. Little did we know what’s in store for us but we have come back home changed and inspired. The visit agenda was to study the impact of the micro loans that Berendina provides to their customers and to see its impact. UnitedProsperity has been involved in providing the micro guarantees for these loans.
The Field Visit
We arrived at Dickoya branch near Nuwara Eliya in the morning. A 4-wheel drive was required to scale treacherous uphill and winding roads. This branch services about 4000 micro-loans and is managed by just 6 Microfinance officers. After a brief presentation on what they do, we set off to meet the people who have been helped by these loans. The clientele varied from a house-wife whose has stared a business of incense sticks, to a person who has setup a shop, to a person who has purchased a cow for this small dairy and even a plantation worker who has built his own toilet! This post later contains some photos and videos about these people and the loan impact. What I shall talk about here is how this impacted us and what I felt was wonderful about this entire setup.
Berendina has been around for more than 25 years and their meticulous approach to doing good as a non-profit is seen in their actions. They have an innovative way of providing loans.
- 3 beneficiaries form a group
- 10 groups form a cluster
- 30 clusters are managed by 1 branch officer.
This way 1 branch officer manages about 900 customers! There are regular cluster meetings where the money is recovered on a monthly basis and the group is responsible for their re-payment. This encourages the group to work together and support each other, even on repayment. In some cases to ease the process, BMI also gives loans to co-operative society as a bulk loan.
But Berendina doesn’t just stop there – they also have a Berendina Development Services (BDS) that is targeted only for improving the quality of life. One of the innovative approaches is about giving coupons for training camps – “Livelihood training”, “Entrepreneur accounts management” etc. These coupons are part of the loan and can be redeemed for training or they can get the cash value back in the case of unused coupons. This enables people to not just avail loans but also get some vocational guidance, education and knowledge. To my knowledge very few microfinance institutions anywhere in the world have implemented such a program.
The plantation worker story is an awe-inspiring one. BMI is the only Microfinance institution that supports plantation works whole-heartedly. Plantation workers are those who have been working for all their lives in tea plantations and are considered very high-risk customers for repayment. Their living conditions have traditionally been very poor. BMI strives to improve their quality of life by providing toilet loans, health camps, eye-checkups and even cataract operations all free of charge as part of their BDS initiatives.
Lets meet some of their customers:
Here are some memorable photos:
The Berendina office, which houses Kishore, the Branch Manager and his 6 Branch Officers.
Parthiban – the Hero of the day. He has received the entrepreneur award from Berendina.
The old and the new hygienic changes that Berendina is bringing about. The plantation workers earlier had common open toilets as opposed to the new private clean toilets.
The Happy Shopkeepers – Srikumaran and Bhuvaneshwari – their lives have changes after the loans they got from Berendina.
Where does United Prosperity fit in?
UP is involved in providing guarantees for the loans that are given by BMI. Basically, the individual loan guarantor provides a loan guarantee for a BMI client. UnitedProsperity takes those funds and deposits it with HNB (Hatton National Bank). Hatton National Bank then makes a loan twice as large to BMI. BMI in turn then provides micro-loans to its client.
Did I hear you ask how UP gets to be a guarantor? Its because of people like you and I. We provide micro-guarantees to various entrepreneurs that BMI seeks to lend to e.g. I have provided some guarantees.
So, if a person like Parthipan wants a loan of 25,000 LKR ( USD 220), he approaches BMI. BMI then updates his profile on http://www.unitedprosperity.org. Then the social media world kicks in — you and I can provide guarantee for half of the loan amount of 220 USD loan that Parthipan wants i.e. USD 110. By guarantees (or pledging) 10$ or 15$ to this cause, people all across the world ensure that a loan can be guaranteed to Parthipan. When the loan is completely guaranteed by the awesome social community, UnitedProsperity now guarantees that loan the BMI takes from HNB – A win-win-win situation for all.
But wait – there’s more. What happens when the loan is repaid (and believe me the loans are repaid — BMI boasts of a default rate of 0.6% – phenomenal!) ? After the loan is repaid, the guarantee on UP is freed and the money can be used to guarantee another entrepreneur !
A splendid way to not only help out the people below the poverty line but also to give them an opportunity to come out of poverty on their own strength. This is not a donation or charity that they get but an opportunity to climb out of poverty!