Poverty is universal. The people trapped within did not ask to be poor and yet very few consider helping them. Even despite the plethora of global aid initiatives, it is not enough to give the poor something to build upon. Banks refuse to give the impoverished loans because the money is too small and risks too high to be considered a worthy investment. But without access to credit, the marginalized poor have no means to raise capital in order to improve their situation. Often they turn to loan sharks who charge so much interest that the poor never even have a chance to pay on the principle. This is the problem that microcredit seeks to answer.
What is Microcredit?
Microcredit is the business of lending small amounts to the poor at very low cost. This allows the poor to start or invest in small businesses to supplement their income and ideally make enough to pull themselves out of poverty. But recently we have seen that there are many for-profit microfinance institutions who are also charging heavy interest on their borrowers, not much lower than the loan sharks. For those in poverty, paying for a loan and its interest is a heavy burden and these microfinance institutions have become a problem rather than a solution.
Why doesn’t Lifeline take interest?
Lifeline works on an interest free, fully not-for-profit, low cost delivery model. This approach resolves the major issues faced with for-profit models and also, we believe, is a more humane approach of minimizing the burden on the poor. We also apply the Grameen model of social accountability, our groups receive loans one at a time to be repaid over an average of twenty weeks. The women in these slums are now able to pay for their children to receive a good education and provide better accommodation for their families.
The Girl Effect
Lifeline works almost exclusively with women. Studies have shown that providing support for women is a successful poverty-fighting strategy throughout the world. Women who have become empowered through education or business tend to delay marriage and reduce childbearing, thereby decreasing the population living within destitute conditions. Furthermore these women use their savings to provide quality education for their children so that they will be able to escape the cycle of poverty. This method of eliminating poverty through female empowerment has been called “The Girl Effect”.