Africa: banks lend to the rich, not the poor

GETTING ahead in Africa is tough. Banks lend money
only to the middle class and the wealthy. Poor Africans
— meaning most Africans — stay poor. It’s even harder
if you’re sick. Without savings to fall back on, many
HIV-positive parents pull their kids out of school. They can’t
afford the fees and end up selling their few possessions
to feed the family. When they die, their kids are left with
nothing.
Though not directly targeted at people with AIDS,
micro-credit schemes go some way toward fixing that
problem. The schemes work like mini-banks, lending small
amounts — often as little as US$100 — to traders or
farmers. Because they lack the infrastructure of banks and
don’t charge fees, most charge an interest rate of as much
as one per cent a week and repayment rates of over 99 per
cent — much better than that for banks in Africa, or in most
places. Many micro-credit schemes encourage clients
to set aside some of the extra income generated by the loan
as savings. This can be used for medical bills or to pay
school fees if the parents get sick. “Without the loans I
would have had to look for another way to make money,”
says Florence Muriungi, 40, who sings in a Kampala jazz
band and whose husband died of AIDS four years ago.
Muriungi, who cares for eight children — five of her
own and three her sister left when she too died of AIDS
— uses the money to pay school fees in advance and
fix her band’s equipment. Her singing generates enough
money for her to repay the loans and save a bit.
Seventeen of the 21 women at a weekly meeting of
regular borrowers in Uganda care for AIDS orphans. Five
are AIDS widows. “I used to buy just one or two bunches
of bananas to sell. Now I buy 40, 50, 60,” says Elizabeth
Baluka, 47, the group’s secretary. “Every week I put aside a
little bit of money to help my children slowly by slowly.”


SOURCE: BUSINESS TIMES