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Microfinance loans stave off poverty, say charities

20 October 2017

WORLD VISION

Accurate portion: World Vision and the World Food Programme supply families with food in the Kasais region of the Democratic Republic of Congo, where fighting has led to food insecurity for 3.2 million people

Accurate portion: World Vision and the World Food Programme supply families with food in the Kasais region of the Democratic Republic of Congo, where ...

SMALL loans provided to families in Africa who have been affected by drought and flooding have prevented thousands from falling into poverty, a report suggests.

The Department for International Development provided £2 million for microfinance loans to help small-scale farmers in Kenya, Malawi, and Zambia deal with the effects of flooding and drought caused by the El Niño phenomenon in 2016 (News, 23 June).

Some 72 per cent of the loans were paid to women in rural areas, to help them to re-establish their crops and livestock, and earn money in other ways between planting seasons. Loans were given to 14,500 families in total, helping 87,000 people.

Some of these diversified into buying or selling tomatoes and dried fish, others used the money to buy a sewing machine to make school uniforms.

Using loans of little more than £100, on average, the Recovery Lending project prevented thousands of families from falling into extreme poverty because of droughts and floods, the report into the project says. The scheme was launched in February 2016 after growing evidence predicted that strong weather patterns would have a devastating effect for the 2015/16 agricultural seasons in East and Southern Africa.

Ninety-seven per cent of the loans have already been paid back in full.

The project was run by World Vision, and VisionFund, the microfinance arm of World Vision. The global insurance director at VisionFund, Stewart McCulloch, said: “We are encouraged to know that microfinance loans were central to enabling families to reduce the use of negative coping strategies, such as taking children out of school, reducing food consumption, and sending family members away for labour in order to sustain their livelihoods.”

Although the project has now finished, VisionFund said that it was open to working with other partners to offer recovery lending for vulnerable communities.

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