Some poor families struggle to pull themselves out of poverty in part because they cannot borrow money. It may seem like a small issue, but the success of almost any business is heavily dependent on borrowing. For example, a farmer may want to purchase a water pump so that he can better irrigate his fields. This will yield a better crop which will allow him to pay for the pump. He cannot save enough money to purchase the pump outright because his current yield provides such small savings that it could take a lifetime or more to accumulate the cash up front. When a whole village is impoverished, there is no one to go to for help. Nor would any bank accept such risky loans to farmers with no assets and no credit history.
At some point, aid groups became aware of this problem and started lending small amounts of money to families. There was an expectation that some of these loans would default and that outside funding would continue to play a key role in the programs. Part of the reason for the defaults is that outside organizations cannot fully vet the people who they are loaning to—they do not know how dependable they are and whether their ventures will succeed. This micro lending model seems to work well in some situations, however there is always a risk of dependency and disruption when sending outside money into a community.
Catholic Relief Services participated in the micro lending programs for many years, but has since developed a system that not only helps break the cycle of poverty, but allows the families to do so with exactly zero outside funding. The model is called a Savings and Internal Lending Community (SILC). The way it works is CRS invests initially in training finance managers called Private Service Providers (PSPs). The PSPs then establish small groups of about 30 people—who all know one another—to participate. Once established, every member of the group must pay a small fee into a common pot each month. Any member of the group can then apply for a loan out of this common pot. This way, the people who know the applicant best are also the people who determine whether the loan request will be granted. Once granted, the loan must be repaid with interest. That interest ever more quickly increases the collective savings of the group allowing members to attempt larger and larger ventures.
Several rules are established to safeguard the process. For example, the PSP maintains the money box, but not the key. There are actually three keys, each given to different members of the group who are not related to one another. But to make the PSP’s position maintainable, a small amount of the monthly savings goes to pay the PSP. Another piece of the savings goes to a “social fund” which can be used to help any member at the group’s discretion should they run into an unexpected medial issue or crop damage for instance.
Since its implementation by CRS, over 274,000 people in Burkina Faso have joined SILC and started pulling themselves out of poverty.
Normally these SILC communities meet independently once a month. In preparation for our visit, the PSPs coordinated about 40 of the groups to come together on one day. Having no idea what we were walking into, our team pulled into the town meeting area in Kaya and were blown away to see over a thousand people waiting for us. As we go out of the cars, the crowd formed a path to its center and began singing and clapping. They seated us with the chief, governor, and community elders. We all introduced ourselves and the community leaders spoke to CRS in appreciation of their work in the community. It was encouraging to hear the profound thanks coming from Christians, Animists, and Muslims alike. The event was a beautiful witness to the CRS model: We are all made in the image of God, therefore serve all of humanity as though we are serving God himself.