Your Impact: Microloans
Most people in the U.S. would find it impossible to fund their entrepreneurial efforts with a loan of only $200 or $300. However, in the area where we work, a loan of this size can turn economic ideas and dreams into a reality and entrepreneurs into agents of change. That was, and continues to be, the motivation behind our small, but impactful Micro Loan Fund.
In 2013, starting with an investment of $5,000, Project Ethiopia launched a modest micro loan program to provide access to credit for some of the poorest families we serve. Our funds were placed in a Dangla savings and credit association established for residents of the Bacha Berayta kebele (a kebele is the smallest administrative unit in Ethiopia consisting of at least 500
Project Ethiopia loans have a very low interest rate – 5% (of which 3% is returned to Project Ethiopia ’s account for growth of the loan fund). This is compared with 12% from larger savings associations and banks. To be eligible for a microloan, applicants must be a member of the savings and credit association and bring at least two witnesses to guarantee the loan. The loan period is for one year at which time the loan must be repaid in full. Most loans are made to expand agricultural production, purchase necessary farming tools/materials, and provide support for retailing their products to the community.
Since the inception of the Micro Loan Fund, Project Ethiopia has made 68 total loans. These loans were made to 35 women and 33 men. Most impressively, 100% of the loans have been repaid in full and on time!
One such recipient of a Project Ethiopia micro loan is Abeba. This past February, Abeba applied for and was awarded a loan for 7,000 birr ($260) towards the purchase of a dairy cow. Dairy production and consumption is growing in the Dangla area and, so too, is the price farmers can receive for their milk. In Abeba’s case, her cow is providing 12 liters a day which she is able to sell to the Dairy Association in Dangla for 15 birr per liter (generating $7/day for her family). At that rate of return, her cow will recover the cost of the loan in just 37 days!
This year we are delighted to announce that a generous donor has stepped forward to support the expansion of the Micro Loan Fund into a new kebele this year! Providing access to low-interest credit for the poorest families in the community creates economic opportunity and empowerment. We are deeply grateful to be able to offer this to even more families.