The Salvation Army: Mustard Seeds

Mustard Seeds participant

Mustard Seeds Partnership
The Salvation Army
101 Newington Causeway
London
United Kingdom
SE1 6BN

Tel: 020 7367 4776
Fax: 020 7367 4715
Email: international.development@
salvationarmy.org.uk

Questions

Why don't you give the women the money rather than loan it and charge interest?
Micro credit programmes are hard love. They are created to give dignity and self respect to the people that are partners in the programme.
In other projects we do give out resources to improve the lives of individuals and communities, for example: wells for safe water, feeding programmes, education programmes etc.
The overriding reason for credit rather than charity is the idea that the money should never run out if the scheme is managed well. The concept is for the £1 that is given to a woman, is paid back with interest and given to the next woman, and so on, and so on. The interest and the original fund provide money to include more and more women in the programme.

Why interest?
If we were loaning money without making a charge for it, we would encounter the wrath of national banks (and therefore governments) who would lose business because of our generosity. As the aim is to build the country as well as the individual, this would not be wise. Also, our funds would never cope with the demand.
We encourage people that are serious and have thought about the programme into the parrtnership by charging interest - they have balanced the cost of the loans against their anticipated profits from their new business and make a calculated decision.
It protects the original fund against national inflation and unforeseen costs such as famine, which destroys the women's ability to repay.

The Salvation Army Mustard Seeds Project seeks to address the problem of poverty in some of the poorest developing countries through a form of micro credit. The aim of the project is to enable the poorest people to help themselves out of the poverty trap by the means of a carefully designed system of loans in order to encourage income generation.

This way of addressing poverty means that poor people receive the help they need in a non patronising manner, and the funds remain intact for redistribution to others in need.

Micro Credit projects are designed to enable the poorest people to help themselves out of the poverty trap. We target the poorest developing countries, the poorest communities within those countries and the poorest people in each community.

Micro Credit is a method of facilitating small loans to individuals with the purpose of generating additional income. The people who receive the loans are so poor that no one would otherwise consider giving them a loan other than loan sharks that add enormous interest to the original loan.

The target group is often women. This is because they are responsible for the welfare of the family and take this whole system seriously. They have everything to gain and nothing to lose.

The initial loan is very small, usually in the region of £50 to £100. Small groups work together and act as collateral for each other. So if one member of the group defaults on the repayment plan the others take responsibility to make the payment. The loan is repaid over an agreed period of time, on a weekly, fortnightly or monthly basis. Interest is added to the loan. This is used to set up a risk fund in the community (used if things start to go wrong!) and to pay for the oversight of the scheme.

The success rate in the repayments of the loan is very high. In many places as much as 98%. This in fact is better than any other banking system. This means that the funding for the Project stays intact and can then be redistributed. After the first loan is repaid it is possible to take out a second larger loan and additional ones as necessary.

Within the Micro Credit Projects we are hoping to add some community development programme and aspects of capacity building. So the actual Micro Credit is simply a part of the total picture. Technical support to the communities is a part of the commitment towards a successful conclusion.

The overall effect of this way of giving help is one of bubble-up. Usually aid is given on the understanding that it will trickle down from the top. Often this type of giving never reaches the bottom level of need. Our aim with the Mustard Seeds Project is to change the face of poverty, from the bottom up.