Financial inclusion in Northern Malawi: Village savings and loans group makes 5000% growth on their income within 10 months
Residents of Tukombo, a trading centre in Nkhata bay District, were all smiles about the improvements in their lives since the introduction of village savings and loans by the Chifundo-Chapeta Community Based Organization (CBO). The CBO is a beneficiary of the Community Development and Knowledge management for the Satoyama Initiative (COMDEKS) Project.
- Financial empowerment for nature conservation, one of the COMDEKS Projects implemented by UNDP, and delivered through the GEF Small Grants Programme remains highly sustainable, training 70 additional groups and funding 53 of these out of resources accruing in the revolving fund.
- 4,845 individuals who benefitted from the project are successfully running small businesses
- Mbamba pilot group saw 5000% growth on their income within 10 months i.e. between March and December 2014.
- Evident transformation of people’s wellbeing, increased economic activity and social cohesion.
Funded through the Japan Biodiversity Fund established within the Convention of Biological Diversity Secretariat, the COMDEKS Project is implemented by UNDP, and delivered through the GEF Small Grants Programme. This allows for a fast, flexible, and proven mechanism to reach communities and civil society at the local level. As part of COMDEKS, small grants are provided to local community organizations with the overall long term objective of enhancing sustainable livelihood activities with local communities to maintain, rebuild, and revitalize landscapes. COMDEKS grant making is expected to generate key lessons on community-based best practices to maintain and rebuild socio-ecological production landscapes toward the realization of "societies in harmony with nature", as defined as the vision of the Satoyama Initiative.
Formed in March 2014, the Mbamba Pilot group of women began saving and trading with Malawi Kwacha (MWK) 5,000 (US$12)[i]. This quickly grew to MWK250,000 (US$581) by March 2015, representing a nominal growth rate of 4,742% per annum. All the money was collected through loans to the group members. The success of the initiative, is evidenced by a number of group and individual success stories that one comes across in many corners of the COMDEKS project area.
Mirriam is one of the happy women who proudly admits that her life has transformed as she is now able to access money for her various needs. “We lend money to each other to generate a 20% interest. The loan and interest are payable within three months” said Miriam. The twist is that the interest does not belong to the group, as is the case with commercial banks and traditional money-lenders. It is appended on to the owner’s account, ensuring continued growth of one’s savings. These will be shared to group members accordingly, at the end of an agreed saving interval.
Miriam adopted her late brother’s orphaned daughter. She now borrows money from the savings to pay the child’s school fees. At the end of December 2014, her group had saved up MWK800,000 (US$1,860). The money was distributed among the group members having set aside another MWK40,000 as the capital for January 2015.
Catherine Phiri, one of the pioneers of Chifundo-Chapeta CBO is a widow. She has observed one of the greatest successes from the savings and loans. Coming from a very poor background, she lived from hand to mouth, sometimes she and her children slept hungry. She then heard of COMDEKS and decided to attend the financial literacy training. With MWK50 as her entry capital, she bought small household items such as salt and soaps which she sold at a profit. With the opportunity to borrow more capital, Catherine worked hard to grow her business and continues to do so. Soon she was able to keep food on her table and put money back into business. She now proudly boasts of having her daughter at Soba Private Secondary School in Blantyre. Now in Form 3, Martha Chiwambala (Catherine’s daughter) sees the sky as the limit.
The main challenge faced by this CBO has been inadequate human resources to carry out the financial literacy trainings. Currently, there was only one CBO covering 3 traditional authorities (TA). Another major problem is availability of clean drinking water. They travel long distances in search for clean drinking water. With the assistance of the Member of Parliament, Ms. Emily Phiri, the communities are working on finding sustainable solutions to these setbacks.
Chifundo Chapeta CBO aims at reducing extreme poverty and hunger amongst community members. Since the launch of the project in 2013, 200 groups have directly benefitted from the US$25,000 grant awarded. An additional 53 groups have benefitted from the revolving fund. From these groups, 4,845 individuals are successfully running small businesses. All the groups which receive loans pay them back with a 30% interest. These interests form the revolving. With the last 10% funding just given, the CBO shows every sign that it will keep the chase, even after cessation of funding.
[i] UN Official Exchange Rate for April 2015: US$1 = MWK430