Communit ies Trans formed: Lesson Five | Page 48

Lesson five

economic developmentone loan at a Time

ov e rv i e wJesus called people to live, learn, and work together in community. His example illustrates how, in collaboration, people can have a far-reaching impact on their community. By combining talents and resources to boost individual opportunities for starting businesses, community members help everyone reach more fullness of life.

k e y s c r i p t u r eMatthew 25:14-30

e s s e n t i a l Q u e st i o nWhat makes microenterprise and microfinance an exciting tool in efforts to change the lives of individuals and families living in poverty?

l e s s o n g oa l s» Build a greater understanding of economic development in the developing world.» Examine how one family’s small business can touch an entire community.» Reflect on God’s personal call to each of us and our response.

m at e r i a l s Pen, Bible

ag e n da» Introduction and opening prayer» Learn about the potential of microenterprise development» Consider the situation in our world today» Reflect on Scripture» Choose a personal response» Close in prayer» Review homework and further study suggestions

pat

ric

ia m

ou

am

ar

/Wo

rl

d v

isio

n 2

00

8

Communit ies Trans formed: Lesson Five | Page 49

i n t r o d u c t i o n a n d o p e n i n g p r ay e r

1. in this study so far, we have looked at four of the five key components of holistic community development.

» Food» Water» Health» Education

Today we will explore the fifth component, economic development.

Recall the video homework assignment from last week. Then share or journal about the following questions:

» What did you learn about microenterprise development and microfinance?

» How do they bring hope to families?

2. offer a prayer. Pray for people around the world who have dreams of transforming their lives.

l e a r n a B o u t m i c r o e n t e r p r i s e d e v e l o p m e n t

1. remember the first time you took out a loan? It might have been for a car, your college education, or even a house. You were likely required to produce proof of income to show that you could afford your loan payments. The lender likely examined your credit history. You might have needed the signature of a parent or spouse to assure the lender of your ability to repay.

Now try to imagine what it would be like to ask for a loan if you are a widow living in

Just

in d

ou

Gl

ass

/Wo

rl

d v

isio

n 2

00

8

Communit ies Trans formed: Lesson Five | Page 50

a small home you don’t own, without electricity or running water, with little means of earning income, and with hungry children to feed and educate. Who would risk loaning you money to buy materials for a small business?

Consider the following situations and determine what each person needs to improve his or her chance of earning income.

struggling in myanmarOhn Myaing used to spend several days a week making a popular snack in her community in Myanmar. She sits outside her bamboo and grass hut selling the snacks made from palm sugar pieces and sticky-rice balls. Although she has a heart ailment and sitting for long hours in the sun weakens her, she continues for the sake of feeding her children—two daughters, ages 4 and 9, and a 14-year-old son.

Ohn Myaing’s husband, Aung Win, has been unable to find even odd jobs to support the family. So Ohn Myaing cut her hip-length hair (although long hair is a treasured part of her culture) to sell to a local wig maker. As it became increasingly difficult to feed her family, she then pawned the family’s cooking utensils, plates, cups, glasses, and even clothes. She can no longer afford the raw materials to prepare her snacks, so the family is living on a diet of plain rice.

Barely living off the landJuliet Hakiri is a 38-year-old widow living with her five children in Nyakambu village, 365 kilometers southwest of Uganda’s capital city of Kampala. With her children (boys between the ages of 8 and 19) dependent on her for school fees, supplies, and food, Juliet works to sell bananas, beans, or groundnuts. She earns the equivalent of about $2 a week. But when these foods are out of season, Juliet has nothing to sell. Her family is left hungry and without household necessities like plates, cups, saucepans, bedding, and clothing.

Juliet’s situation is not unique in Uganda. Most people depend on agriculture for an income. They use hand-held hoes to tend small plots of land, but they have limited access to tools and farming skills. The average income in the country is approximately $220 per year.

Farming among thornsSomadasa, 41, has worked as a farmer in Sri Lanka’s Lunugamvehera region since childhood, just as generations before him. Though he toils in the scorching sun to raise enough crops to earn a small income for his wife and five children, he has never been able to provide for all of their needs.

Although people in the region rely on agriculture for their income, it is one of the driest regions of the country, strewn with thorny bushes and dependent on

Jon

Wa

rr

en

/Wo

rl

d v

isio

n 2

00

8

Communit ies Trans formed: Lesson Five | Page 51

rain to cultivate the crops. Some farmers have outdated irrigation tanks, but they go dry during the arid season. In addition, the region experiences severe drought every two or three years.

As a result, Somadasa and his family never have the resources they need to thrive. Their lack of material resources is sometimes intensified by the emotional anxiety that accompanies trying to survive in such circumstances.

2. share or journal your responses to the following questions as they relate to the stories above:» What is the business he or she can build on?

» What kind of training or education might this person need to make the business a success?

» What kind of financial or material input might this person need to make the business a success?

» Is there any chance that this business could expand to employ other family or community members?

s c r i p t u r e r e F l e c t i o n

1. read the following passages.

» Matthew 25:14-30» Proverbs 31:10-31

2. share or journal your responses to the following questions: » What does the Matthew passage say about how Jesus might view economic

activity?

re

en

a s

am

ue

l/W

or

ld

vis

ion

20

07

Communit ies Trans formed: Lesson Five | Page 52

» What kind of “transformation” takes place in this story?

» How do you think this applies to entrepreneurs in developing countries today?

» What does it say to us about how we use our resources?

» We often think of this Proverbs passage in regard to character, but what does it say about this woman’s ability to be enterprising?

» How many different business enterprises is she engaged in?

c o n s i d e r o u r wo r l d t o day

1. consider how microenterprise works:

struggling entrepreneur applies for a microloan While many of the working poor have the ideas and ability to create a small business, few can access the capital they need to begin. Because they are asset poor (without the physical assets like a car, home, etc., that can be used as collateral) and are in need of only small loans, banks will not lend to them. With little savings, they are trapped in poverty.

The only credit available to them is often from local moneylenders who charge exorbitant interest rates (sometimes 200 to 400 percent). The alternative is to apply for a small loan, or microloan, through a microfinance institution (MFI). World Vision provides such loans. To successfully apply for a microloan, the entrepreneur must demonstrate trustworthiness, a good work ethic, and a sound business idea.

While many of the working poor have the

ideas and ability to create a small business,

few can access the capital they need

to begin.

ma

ry

Ka

te

ma

cis

aa

c/W

or

ld

vis

ion

20

09

Communit ies Trans formed: Lesson Five | Page 53

This is typically not an individual effort meant to benefit one entrepreneur. Rather, an MFI will help a community form a community bank, which is formed by a group of chronically poor entrepreneurs who mutually guarantee each other’s loans. The bank will charge a reasonable interest rate to cover the cost of running the loaning program to help people becoming financially independent and competitive under normal market conditions and to avoid destabilizing the local economy. This approach has led to an amazing loan repayment rate of 98.7 percent.

Business training The MFI gives four to six months of training in saving, handling credit, and basic business. Sometimes this training includes reading and counting. Business coaching provides eager entrepreneurs with assistance in accounting, marketing, and management, and in the case of World Vision, it is based on biblical and ethical business principles. The training helps the client prepare a sound business case, which is required to receive a loan.

microloan is givenA loan can be as little as $50. With this money a client can buy seed, goods, fertilizer to increase crop yields, or basic equipment to operate a small enterprise (e.g., a sewing machine).

Business is created or expands Profits made from the sale of crops or merchandise can then be used to buy more seed or goods, or it can be used to start a new business such as tailoring.

coaching Clients continue to receive coaching in business as well as agricultural or trading practices as part of the development program.

Business thrivesWith a loan, entrepreneurs can improve farming, open a hairdressing salon, sell handmade clothing and handicrafts, or run a small convenience stall, to name a few. These businesses create jobs and generate additional goods and services, and the whole community benefits.

Families gain self-sufficiency Families are now able to support themselves and provide food for themselves all year round. The burdensome cycle of borrowing money from local moneylenders at high rates of interest is broken.

children impacted Parents are able to give their children more nutritious food and the family health improves. Parents have enough money to send their children to school.

da

na

pa

la

de

/Wo

rl

d v

isio

n 2

00

8

Communit ies Trans formed: Lesson Five | Page 54

loan repaid and money recycled Once the client has repaid the loan, he or she can take out a bigger loan to continue to expand the business. Repaid loans are recycled to help other poor entrepreneurs to grow their businesses. MFIs build a bridge between commercial loan capital and the credit-worthy poor so they can lift themselves out of poverty.

there are several types of loan institutions:

community banksThese loan circles create an opportunity for the poorest entrepreneurs to obtain credit. Self-selected groups of 20 to 30 borrowers agree to cross-guarantee each other’s loans. The group screens potential borrowers and tracks each repayment, building their leadership and sense of pride along the way. Weekly meetings offer accountability and support and build business skills. Loans typically range from $50 to $500.

solidarity groupsDesigned for more experienced entrepreneurs with larger enterprises, solidarity groups have fewer members than community banks, with an average of three to six people who guarantee each other’s loans. Members who make repayments on time become eligible for larger individual loans. Loan sizes range from $300 to $800.

individual loansClients who have either grown their businesses successfully through a solidarity group or have medium-sized businesses qualify for individual loans ranging from $500 to $5,000. Loans typically require either two guarantors or collateral. Borrowers often create a multi-year business plan in consultation with their loan officer. These larger loans help clients to grow their businesses and employ others in the community.

This approach is working throughout the world to help communities transform themselves from a group of people heavily burdened by debt and worry to people who can celebrate their hard work and watch their children thrive.

Lack of access to credit is a particular problem for impoverished women whose economic status is even more insecure than that of men. Yet World Vision reports that on average, women entrepreneurs use 92 cents of each dollar of extra income to improve their children’s health and education.

» More than 3,300 microfinance institutions reached 133 million clients with a microloan in 2006.

» 93 million of the clients were among the poorest when they took their first loan.» 85 percent of these clients were women.

(Source: www.visionfundinternational.org)

Lack of access to credit is a particular problem

for impoverished women whose

economic status is even more insecure

than that of men.

Jon

Wa

rr

en

/Wo

rl

d v

isio

n 2

00

8

Communit ies Trans formed: Lesson Five | Page 55

2. share or journal about any entrepreneurs you’ve encountered or entrepreneurial experiences you’ve had. Why do think women are the most successful microentrepreneurs, have the best repayment rates, and receive the most loans?

c H o o s e a p e r s o n a l r e s p o n s e

read luke 12:48b. Then journal or reflect on the following: » Consider the words of Jesus. How might He be calling you to respond?

c l o s i n g p r ay e r offer a prayer of thanksgiving for people who have resources to share with those who are trying to transform their lives. Pray for families seeking opportunities to work and improve their lives. Pray for the continuing effectiveness of World Vision and other organizations engaged in economic development work.

H o m e wo r k

1. Find a newspaper or online article related to one of the topics you have been studying—food, water, health, education, and income generation. Bring your article next week and be prepared to provide a general summary of it.

2. read about child sponsorship at www.worldvision.org and learn how sponsorship is connected to holistic community development and can be a bridge-builder between cultures.

Fo r F u rt H e r st u dy

•LearnmoreaboutWorldVision’sapproachtomicroenterprisedevelopmentatwww.worldvisionmicro.org.

•Learnaboutaworldleaderinmicroenterprisedevelopmentat www.grameen-info.org.

•ReadBanker to the Poor, the autobiography of Mohammed Yunnis.

+

co

ll

ins

Ka

um

ba

/Wo

rl

d v

isio

n 2

00

9