Small Loans Go a Long Way to Lift Family out of Poverty [Archives:2001/35/Business & Economy]

August 27 2001

Abdulbasit Ishak
Program & Communications Officer
Fatima, a young mother from the urban slums of Taiz was struggling to feed her four children, a paralyzed husband and mother-in-law when she heard of a small loan program that could boost her incense business.
In the hope of improving her living conditions, she approached the Taiz Microfinance Institution (MFI) and was told of a $50 loan to expand her business. She was one of 1,200 women who benefited from MicroStart, a global leading scheme financed by the United Nations Development Program (UNDO) in more than 18 countries, including Yemen.
Launched as a pilot project in the three governorates of Sana’a, Taiz, and Aden, MicroStart aims to provide microcredit, or small loans, to the poor in Yemen, who don’t have the necessary collateral to obtain the capacity of national microlending institutions such as MFI, so that they can expand their outreach and better serve poor entrepreneurs like Fatima.
With her $50 loan, Fatima was able to purchase incense in bulk and increase her sales. With the extra income she generated, she sent one of her four children to school. She was also able to repay her loan, and apply for a second one.
The experience of microfinance institutions around the world has shown that, contrary to popular belief, the poor have a repayment rate of 98% percent higher than that of commercial banks. Experience has also shown that women in particular will spend the extra income generated from loans on their households, thus improving the living conditions in their communities.
Today, Fatima is busy planning her family’s future. With the second loan, she hope to send a second child to school and give them brighter prospects for the future.