On Friday I went into the MLF Malawi head office in a town called Kasungu. Alfred gave me a quick tour of the office and I met all the lovely support staff. He then helped answer all my questions about how the MLF works here in Malawi. You can find out loads more on the website but here is a simple version for people who can only browse the innocent blog.
Lets start with the mission.
The mission of MLF is to significantly reduce the depth and breadth of poverty in the communities in which it operates. It does this by lending money to groups of women to help them build sustainable businesses and by providing meaningful training and ongoing mentoring support. It focuses on women primarily because they have fewer opportunities and because the men (I'm allowed to say this because I am one) aren't as good at saving for their families, especially their children.
Why lend money?
Very simply, helping the poor get out of poverty through their own efforts is likely to be more sustainable than handouts.
The other thing to note here is that banks generally won't lend to anyone who doesn't have collateral so immediately this puts a huge majority of Malawians outside of the normal financial system.
So how does MLF work?
1. MLF have offices in 15 of the 26 districts in Malawi*. They have a huge list of clients in each of these districts but are always looking for new people to help. To do this, they go into rural villages and explain about how the MLF system works, the structure of the loans and benefits of the program. One loan officer from the MLF looks after 10-15 groups of ladies. Each loan officer reports into a branch manager who then reports into the support team in the head office.
2. Women who are interested in receiving a loan must then form groups by themselves and gain the village elders' approval, before coming back with their proposals. The groups are generally made up of 15-20 women and the money is loaned to the collective of all of those people. By taking the loan as a group, all members have to support each other in the repayment and also have to work together rather than starting businesses that compete with each other.
3. Once the application is received, MLF organise a training session to explain in more detail about how everything works. Not everyone can read so it's really important that the rules are clear before the loan starts to avoid problems later on. The training also covers the basics in business, including feasibility and market research as well as how all the Microloan paperwork works.
4. Following this, the ladies then all submit their joint loan application. This gets checked by the Branch Manager and the loan is then approved. The loan is then disbursed so that it can be used according to each business plan of the individuals in the group. Then, every two weeks, the group meets with the loan officer from the MLF to see how things are going. Depending on the setup of the loan, repayments will start after a few weeks and will generally payback within 4-6 months. If people are late with the payments, it is noted but the repayments don't increase and everyone gets together to understand why and how they can get back on track. As the loans are all paid back, the money is available for another set of people (or the same people again for another round). Interest is paid on the loan this helps towards growing the total pot of money available for others, and also helps to pay for the support team who provide the training and manage all the financial paperwork and systems.
So hope that explains things a little better. Please do read more on the website of the MLF - Microcredit is such an interesting area and has been around for ages. One of the pioneers of it is a super intelligent man called Muhammed Yunus who setup one of the first micro-credit instituitions called the Grameen ("Village") Bank in Bangladesh. The bank is owned by the 7 million people who it lends to. The Nobel Peace Prize was awarded in 1996 to both Mr. Yunus and all the people who own his bank for its innovative approaches to poverty reduction.
Pretty inspiring stuff if you ask me.
Sorry there aren't any pictures in this blog but hopefully, it was worth the read.
* They're expanding all the time with 2 new districts this year. What's great is that there is scope to keep growing and helping more people.