BY SMITA DONTHAMSETTY BRIAN FIKKERT RUSSELL MASK THURSDAY, DECEMBER 10, Church-Centered Microfinance and Microenterprise Development in the Majority World

What’s Broken?  Broken Systems:  Poor people typically do not have access to financial systems such as banks  Poor people need financial systems that enable them to save or borrow for:  Life Cycle Needs  Emergencies  Investment Opportunities (Household or Business)

What’s Broken?  Broken Individuals:  Worldview Issues: e.g. not understanding “image bearing” status  Heart Issues: e.g. not wanting to be responsible

What’s the Solution?  We need ministries which address the brokenness at both the systemic and individual levels:  Sound Practice in Microfinance  Evangelism and Discipleship (church)  Highly Relational Ministry (church)  We also need to address inadequate technical knowledge concerning business and financial management

Poverty Levels & Desired Interventions Near-Poor: Moderate Poor: Extreme Poor: Destitute: Poverty Line Savings, Insurance, Business Loans, Business Development Services, Household Financial Education Savings, Insurance, Business Loans, Small Business Training, Household Financial Education Savings, Insurance, Small Contingency Loans, Small Business Training, Household Financial Education

Microfinance Provider Model  A church, mission or ministry provides microfinance services (savings, loans, insurance) to its community  Chalmers STRONGLY recommends that churches, missionaries, and small ministries do NOT pursue this model.  Lack technical capacity  Cannot reach sustainable scale  Difficult to combine with a culture of grace

Microfinance Partnership Model  A church, mission or ministry partners with an existing microfinance provider  Each party focuses on its primary gifts and together are able to minister holistically:  Microfinance Institution lends and collects loans  Church focuses on evangelism and discipleship

Microfinance Promotion Model  A church, mission or ministry promotes the formation of a savings and credit association (SCA) in the community:  SCA is owned and operated by the poor themselves  Church does not manage the group or touch the money  No outside loan capital

Complementary Training Model  A church, mission, or ministry provides training in:  Small Business Management  Household Financial Management  Health Topics  Can be done from a Biblical Worldview Perspective

Poverty Levels & Appropriate Interventions Partnership Model Promotion Model Complementary Training Model NEAR-POORYES MODERATE POOR YES EXTREME POORNOYES DESTITUTENO

Q1: What’s the difference between Microenterprise Development (MED), Microfinance (MF), and Business as Mission (BAM)? Microenterprise Development Microfinance Focus on lumps sums for business opportunities (includes Microcredit, Savings build-up, Agricultural Finance, and the work of most Microfinance Institutions (MFIs) Financial services (savings, loans, insurance) that enable them to obtain lump sums for emergencies, life cycle needs, and opportunities for household investment. Business Development Services that help low- income entrepreneurs with management, accounting, production, business infrastracture, product development, and market access.

 Women:  Women tend to put the family first  Women tend to repay their loans better because they want to make sure they have access to future services  Men:  Men often desire quicker benefits  It is often more costly and challenging to work with men. Some programs do work with both men and women now. Q2: Why does so much microenterprise development work only with women? Can’t men be helped too?

 It is slower than injecting outside, but  It addresses 3 sets of needs.  It builds on local assets.  It can be done without having to wait for outside money.  It can reach very poor people.  It can be very holistic. Q3: Isn’t doing microfinance based solely on savings very slow?

 Subsidize training of majority world people to do this work.  Encourage MFIs to become more holistic, possibly via funding spiritual transformation activities or staff, or staff training.  Pray and support BAM workers  Identify Christian MFIs using Kiva or microplace.com and “lend” to them.  Encourage local churches to partner with Christian Microfinance Institutions Q4: What are appropriate roles for the North American church in MED/Microfinance?