The Microfinance for Poverty Reduction Project Zambia, a Grameen Trust (GT) Build-Operate-Transfer (BOT) project in collaboration with the United Nations Volunteers (UNV), was set up in July 2004. It aims to provide 3,000 poorest Zambians with microfinance services over a three year period, in an effort to lift them out of poverty. The project set up two branches: one urban branch in the Zambian capital Lusaka, and a rural branch in Chongwe, and disbursed its first loans in January 2005. Two senior staff from Grameen, each with over 15 years’ experience, were assigned to run the program .
In Zambia, the poor are defined as those who are landless, earning a daily income of less than $1 a day. In fact, poverty is so extreme that the daily wage of the poor is actually way below one dollar. The scarcity of water is so acute that people have to walk distances of even 5-6 km, simply to collect water for survival. People are engaged in various economic activities including part time work in the agricultural sector, trading dry fish, poultry, vegetables, clothes, etc. The targeting criteria for the Microfinance for Poverty Reduction Project Zambia was thus defined as women who were permanent residents in and around the branch area, with an income of less than 5,000 Kwacha (which roughly translates to below $1) a day.
The project was able to implement the Grameen Generalized System (GGS) from the very beginning. This is because the deputed Grameen Managers were trained in GGS during its formative stage; therefore, they have a firm grasp on how the system works. So far, the average size of the basic loan is $62 over a one year term. The borrower will be eligible for a fresh loan after 6 months as is the practice with GGS. The project already has 350 members and is confident of reaching its final target within three years.
Zambia is a very sparsely populated country; in the rural areas, often the distance between two households is 1-2 km. In Lusaka, the poor all live together in one area, called a “compound”. Therefore it is easy to access the poor in these compounds for providing microcredit. On the other hand, the Chongwe branch, situated about 40 km away from the capital, has its members scattered over a radius of 60 km. As the Grameen approach relies on the branch staff to physically visit members’ homes for targeting and monitoring purposes, such big distances pose a serious threat to the project’s sustainability, as operational costs increase tremendously.
Rashidull Alam, Manager of the Chongwe Branch, disbursing one of the first loans to a Project Member
For the Chongwe branch, it becomes very difficult to meet its monthly target of attaining 100 new members, because there are simply not that many people around!
Savings is another issue, as the Zambians have yet to grasp on to the savings culture, so microcredit becomes difficult to implement, because people tend to spend their daily earnings right away, not willing to make investments in productive activities.
Another problem is that the family relations are weak in Zambia. The majority of the project’s female borrowers are unmarried, but with 3 or 4 children. Therefore, there is no support system for the family to help in the proper utilization of loans through income generating activities. Since the family structure is weak, if any money comes in to the hands of the male member of the family, it is immediately spent on recreation, instead of productive investments.
Now, over 60% of the Zambian population is affected by HIV, with over 200-300 people dying from AIDS everyday. An entire generation is being wiped out by the AIDS pandemic, and this has a huge impact on the economy. The young generation, capable of working and utilizing microcredit, is being wiped out, making it difficult to generate income using micro-loans.
Also, in the bush, there are no roads, no connection between villages or members’ homes. The Manager has to walk through tall grass and fields, filled with wildlife, including snakes and bugs. So these treacherous conditions make traveling to peoples’ homes to increase outreach extremely difficult.
The work ethics in the country is also an issue, because people are not yet accustomed to working long hours or overtime. So this leaves lots of unfinished work for the day, hampering the branch operations.
Factors Conducive to Success
The project’s success in the country’s microfinance sector can be attributed to the positive response that microcredit has had since it was introduced in 2002. Already, there are 19 MFIs in the country, but only theZambia Project is implementing microcredit directly at the village level. This has had an even greater impact on the poor than the other MFIs.
Also, the interest rate charged by the project is the lowest in the country. At the national level, the rate of interest is 60% on a declining basis, whereas the Zambia project charges 40%, making its product more attractive and attainable for the poor.
Despite having a low level of education in rural Zambia, the project staff did not face any language problems because the medium of education here is English. This is not only a remnant of Zambia’s British colonial tradition, but also a medium of mass communication where 72 different languages are spoken.
Specifically for the Chongwe branch, the work environment is also a conducive factor, because the Manager and his staff all live together in one bungalow, where they have also set up their office. This has facilitated cohesion and understanding among the staff members, and has instilled the Grameen philosophy of teamwork, in spite of long working hours.
Most of all, the Zambian people themselves are a key success factor for the project. People are extremely polite and friendly, and they are willing to work together and aid the project staff in such difficult conditions. This makes working in Zambia a great experience for the Grameen staff, despite all the challenges they have faced.