Microloans

Across Africa, women selling goods in the marketplace are often the only source of monetary income for families. These women are true entrepreneurs, but like any small businesspeople they must have access to credit in order to be successful – and very few women in rural Ghana are able to get a loan from a bank. Thus, the development of microlending.


What is a Microloan?

Microloans are exactly what their name suggests: very small loans, usually between $50 and $500. Pioneered by the visionary Grameen Bank in Bangladesh, microloans are now commonly used by the financial and nonprofit sectors across the developing world. They are normally issued to women hoping to start a small business or expand an existing business.


How are Loans Used?

The Yonso Project issues microloans in rural Ghana to groups of five women at a time. Our loans start at $50 per borrower. As with microlending projects across the world, our borrowers' most common business ventures are producing, trading, or selling food or related commodities. Borrowers typically use their loans to buy bulk goods to sell or to purchase equipment to increase production. Our current customers include store owners, craftspeople, and traders; as the program grows, we hope to also begin issuing loans to farmers to help them develop higher yield crops.

After a group of borrowers has successfully repaid a loan, they become eligible for a larger one at a lower interest rate, allowing them to continue to increase their income. We re-loan the money that was repaid, thus creating more borrower groups and expanding the program's reach. We also continue to seek new donors in the US to sponsor new groups.


The Multiplier Effect

When a donor sponsors a microloan group for $250, that money doesn't just disappear. It circulates through the local economy as the borrowers buy goods or services. And because the money is repaid to the Yonso Project and loaned out again and again, a microloan sponsorship can in effect have a real value much, much greater than its initial dollar amount. When a sponsor's $250 is borrowed and repaid successfully in four loan cycles, the sponsor has just made a $1,000 impact on the community! Visit our Sponsor a Microloan Group page and follow the link at the bottom to become a sponsor now.


Why Groups? Why Not Individuals?

Our program follows in the footsteps of many other successful microlending ventures around the world. Organizations have found that issuing loans to groups of borrowers greatly increases repayment rates, since each individual borrower's ability to get a new loan is dependent on the entire group repaying the old loan.
Loaning to small groups creates a social support network for the borrowers; each person has a social incentive to repay, because her repayment helps her fellow group members. Watch a video here of our Yonso Project staff working to explain the Microloan Program in a town meeting in Yonso.


Stimulating Local Initiative

Although direct aid – goods or money given as a grant – plays a valuable role in development, it also has its limits. Rather than creating a stronger community and economy, some direct aid programs can create a system based on dependence on the aid.

Microloans, in contrast, fight poverty by increasing local economic activity organically. Like any lender, the Yonso Project expects repayment, which forces the recipients of the money to use their loans wisely and effectively. The chart below shows an example of the average weekly finances for an individual borrower prior to entering our program and then for each of their first three loans after entering our program.


A borrower's weekly expenses increase when she takes out a loan and begins making payments every week. However, because her loan allows her to increase the volume of her business, her gain in income is much higher than her increase in expense; that difference is represented by the blue bars representing profit. Thus, the borrower has more money available each loan cycle to provide for her family and continue to reinvest in her business.


Where We Are Today
The Yonso Project Microlending Program began making loans in Yonso in 2007 after hours of town meetings, focus groups, and discussions with local officials. Our program today is based on what citizens of Yonso have identified as their priorities and on our own extensive research into microlending operations around the world. The Women's Trust, a nonprofit operating a microlending program in the Ghanaian city of Pokuase, also helped us train our staff in the basics of microlending.

Our efforts in Yonso were so successful that we soon expanded the program to the neighboring community of Kyekeywere. The program has continued to grow as rapidly as we can raise new capital in the US, and in 2009 we are now making loans in two additional nearby towns in rural Ghana, Apaah and Akrofonso. Over two hundred women in the area have now received microloans from the Yonso Project, and the majority of those borrower groups are continuing to repay their loans and receive new, larger ones!

The demand for new loans is huge, and we regularly receive requests that we do not have the funds to provide. The only thing limiting the amount of loans we can make is the capital we have available to lend. To sponsor a microloan group, follow the link at the bottom of our Sponsor a Microloan Group page.

Or, to make a smaller donation, visit our general Donations page.

Please contact us with any questions about the microlending program or the Yonso Project in general!