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CARE and Microfinance
Microfinance and poverty reduction
CARE sees access to affordable financial services as central to addressing poverty and it has been promoting the provision of microfinance for more than two decades through a variety of methods and at various levels as a key part of its economic activity development projects. Of the world's 500 million micro and small business owners, less than 2 percent have access to financial services and the business training vital for the success of their enterprises. CARE's micro and small enterprise programmes work hard to ensure that poor people around the world have access to the solid financial and business training tools and the resources they need to help lift themselves out of poverty. Currently, CARE has 131 small economic activity development projects in 39 countries providing poor people, 90 percent of them women, with the assistance they need to increase their incomes and make their futures more secure.
Promoting microfinance at the grassroots
At the grassroots level CARE works with local community groups, in helping very poor people without access to formal financial systems to organise and finance their own informal financial institutions called Village Savings and Loans Association (VSLAs). CARE developed its VSLA methodology in 1991 in Niger. It has since established more than 54,000 such associations in 21 African countries serving over one million members. It has also established VSL associations in Afghanistan, Cambodia, Ecuador, India and Sri Lanka. As their name suggests VSLAs are groups formed by poor people that begin by pooling the savings of members and then eventually using these savings to make loans to individual members. In 2008, CARE launched an ambitious ten year programme called Access Africa which aims to provide basic financial services for 30 million of Africa’s poorest people – at least 70 per cent of whom will be women. It is doing this by expanding its existing VSLAs to 39 countries across Africa.
Developing microfinance institutions
At the institutional level CARE has supported the creation, development and strengthening of many microfinance institutions (MFIs) across Latin America, Asia and Africa. CARE’s goal is to develop and enhance the capacity and capability of MFIs to independently provide effective, long term, and sustainable financial and non-financial services to the poor. MFIs provide equipment and working capital loans to small and micro enterprises that are typically larger and more formal than those receiving group savings and loan services. One such MFI is the Small Business and Microenterprise Development Entity (known by its Spanish Acronym EDYFICAR) which was established by CARE in Peru in 1998. EDYFICAR offers a variety of financial products including individual and group loans to poor people. It has grown to become a leading microfinance institution in Peru with a loan portfolio of approximately over $200 million, with 1,170 employees serving over 195,000 clients across 13 regions of Peru. The Inter-American Development Bank ranked it ninth among MFIs in Latin America.
At the global level, and since access to commercial sources of capital remains a serious impediment to growth for many MFIs, CARE helped create MicroVest a specialised investment fund that raises and provides capital to smaller, growing MFIs. MicroVest has placed more than US $80 million in debt and equity investments with 37 MFIs in 16 countries since its inception in 2003.
Developing microfinance partnerships
CARE receives support from a number of financial institutions for its pioneering work in the area of microfinance. For example, Barclays, CARE International and Plan have joined together in an initiative to improve the quality of life for poor people by extending and developing access to basic financial services. The initiative brings together the resources, skills and experience of each organization and aims to reach over 500,000 people across Africa, Asia and South America. This partnership represents a three-year, £10 million commitment to support financial inclusion through the development of savings-led community finance. In addition, CARE and Bajaj Allianz – the Indian arm of large insurance company Allianz – are working together to provide insurance for people in southern India, that were affected by the tsunami in 2005. The investment firm JP Morgan Chase supports a microfinance disaster loan fund project that CARE is implementing in the tsunami-affected counties of India, Indonesia, Sri Lanka and Thailand. The project is designed to strengthen MFIs capable of providing concessional loans and grants to families and communities seeking to rebuild livelihoods through enterprise development. Furthermore, CARE International and the computing giant IBM are planning to jointly build the Africa Financial Grid, a centralized management information system designed specifically for microfinance institutions in Africa.
More information on our microfinance programmes.
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