Mandate eNewsletter, 2008 - Issue No. 1

Can Anything Good Come Out of Bunyoro-Kitara?
by Dr. Brian Fikkert

“Words cannot express what this [savings and credit] group has meant to me and my family. I am just so thankful to God for what the group has done.” As she uttered these words, a warm smile cut across Elizabeth’s serious and determined face. Elizabeth has reason to be serious. Living in rural western Uganda, Elizabeth, her husband, and four children face the daunting challenges that characterize this region including low incomes, high rates of infant mortality, child sexual abuse, HIV/AIDS, and illiteracy. At first glance, this region seems like the last place in the world to find the assets necessary for economic growth.

Elizabeth and her family live in the Bunyoro-Kitara Diocese of the Anglican Church of Uganda, where Reverend Mike Ateenyi is Director of the Diocesan Office of Planning Development, and Rehabilitation.¹ Mike explains that in an effort to alleviate some of the suffering in the region, the diocese began to explore ways to use microfinance to enable poor people to acquire enough capital to start and grow their small business and to meet other household needs. Things got off to a rough start when a donor from the United States gave money to the diocese to lend out to poor people, who subsequently failed to repay their loans. Mike then began to seek loan capital from Ugandan microfinance institutions (MFIs), organizations that try to emulate the highly-successful Grameen Bank of Bangladesh, founded by Nobel Laureate Muhammad Yunus. MFIs lend donor money to low-income people and then collect back the principle and interest on these loans. Unfortunately, Mike had little success in attracting any MFIs to work in his diocese, given the people’s lack of demonstrated capacity to handle loans. Without loan capital from outside donors, it appeared that there was no way for the people to improve their businesses and their lives.

However, after receiving training from a German organization named Kindernothilfe and from the Chalmers Center,² Mike shifted to an asset-based approach in his microfinance work. Instead of looking outside the community for capital and human resources, Mike began to identify the assets within the low-income communities in which he was working. He soon discovered that one of the most important assets in these communities is that even the poorest people can save if provided the opportunity. Mike and his staff began to help the people to form their own savings and credit associations in which they save and lend their own resources to one another. Within 18 months, the diocese had started 11 savings and credit groups with 189 members.

Elizabeth and her husband, who buys and resells fish, struggle to support their four children, two of whom are orphans they have adopted. When Elizabeth joined one of the Anglican Church’s savings and credit groups, she began to sell beans in the market that she purchased from a wholesaler. The savings and credit group provided her with a place to deposit savings out of her profits and to take out three loans in the amount of $18 each. By saving, borrowing, and investing wisely, Elizabeth was able to grow her business slowly but surely. She now has a small store stocked with groceries and household items. Her face beams when she discusses the greater financial stability this business has brought to her family.

But the impacts of the savings and credit groups in the Bunyoro-Kitara Diocese are more than just economic. The group meetings open with prayer and include joyful singing. Women report that they have started going to church as a result of the testimony of the group and the constant encouragement of Rev. Mike and his staff. One savings and credit group has even asked for Bibles so that they can conduct evangelism in their communities.

The savings and credit groups in the Bunyoro-Kitara Diocese are not alone. All around the world researchers and practitioners are discovering the benefits of a new, asset-based approach to microfinance which relies on the savings of the poor rather than on outside funds for loan capital. In addition to building upon people’s ability to save, this approach uses other local assets such as the knowledge, social relationships, and administrative abilities of the poor themselves to form and operate these groups. This approach is not a panacea, and the savings and credit groups can face all sorts of problems. But these groups can and do work, transforming the lives of families like Elizabeth’s all around the world.

What can threaten the formation and functioning of these savings and credit groups? Research is finding that the experience of the Bunyoro-Kitara Diocese with the donor funds from the United States is quite common.³ It turns out that a quick way to destroy these savings and credit groups is to introduce donor funds for loan capital. While more research is needed to uncover all the reasons for this, standard economic theory and banking practice have demonstrated that people manage their own money better than the money from a faceless donor living a world away. Hence, building upon the assets of the poor makes sound economic sense in the world of microfinance.

The world needs more people like Reverend Mike, people who can see assets and not just needs, people who can see that good can indeed come out of places like Bunyoro-Kitara. Just ask Elizabeth.

¹ Readers interested in learning more about this subject can read, “Case Study of the Self-Help Affinity Group Model of the Bunyoro-Kitara Diocese of Anglican Church of Uganda,” by Brian Fikkert, Working Paper #207, Chalmers Center for Economic Development.

² Mike attended the Chalmers Center’s Christian Economic Development Institute co-hosted by Five Talents International and Uganda Christian University in August 2005. The Chalmers Center is very grateful to both of these organizations for the partnership.

³ See the article, “Community Managed Loan Funds: Which Ones Work?” by Jessica Murray and Richard Rosenberg, Consultative Group to Assist the Poor, Focus Note 36, May 2006. Available at www.cgap.org.

For more information about the Chalmers Center, visit us at www.chalmers.org.

4/15/08