Success of microfinance project sees women benefiting as Malawi economy stabilises

The women of the Tikondane and Mulindiyani savings and loans group burst into song as our vehicle pulls into their village, a collection of huts and mud brick buildings about an hour outside of Malawi's capital Lilongwe.

The welcoming party of 25 women has good reason to be happy: a year ago they started their microfinance group with the help of development agency Concern Worldwide, and last week the first round of dividends was allocated to its shareholders. Members can now access loans on a regular basis, a new development for the community as there are no local banks in the area.

Those institutions that do have branches in nearby towns rarely, if ever, provide micro-
financing loans to people without collateral.

Group member Christina Geoffrey took a loan of 7,000 kwacha (about €18 ) so she could buy fish to sell at the local market. She had to pay the money back within three months before another loan could be accessed. “I sold the fish for 13,500 kwacha and paid back 8,200 after only one month, so I made 5,300 for my family,” she said.

Stewart Gee, who co-ordinates Concern’s Food, Income and Markets Programme, says the scheme has been extremely successful nationwide, and there are now thousands of women involved in hundreds of groups, far more than they had anticipated.

"We saw the need for microfinance structures in rural Malawi because of the absence of local banks, so we train people here how to set up and manage the groups. They now have access to money for things like paying school fees or investing in their farms," he said.

Under threat
Numerous development agencies are running various programmes such as this across Malawi, one of southern Africa's poorest countries, but they came under threat during the time of Malawi's last president Bingu wa Mutharika.

Before he died of a heart attack in April 2012, wa Mutharika had fallen out with Malawi’s western donors – who fund up to 40 per cent of the country’s annual budget – over what they saw as his increasingly dictatorial tendencies.

That coupled with the global economic downturn hit the country hard. The kwacha went into freefall, which drove inflation and interest rates through the roof.

Commodities such as petrol and medicines, essential to development programmes, became hard to come by.

In addition, taxpayers’ euros used to fund this work were losing value daily. The money had to be changed through the official exchange rate, while a burgeoning foreign currency black market made everything more expensive.

Queue for days
According to Gearóid Loibhéad, Concern country director, his predecessor had to develop numerous contingency plans to keep their programmes running as the economic and political crisis worsened.

“We run different development programmes across the country so petrol and diesel are essential for us to deliver, and there was a stage when people had to queue for days to get fuel. It came to a point where we had to rent out and manage our own fuel depot, which is expensive and high risk, to ensure we had fuel,” he said.

Joyce Banda, who took the presidential reins in Malawi shortly after wa Mutharika died, has managed to stabilise the economy somewhat.

To turn things around, Banda introduced IMF
approved reforms that included devaluing the local currency by 40 per cent. This meant many ordinary people could afford to buy more with their meagre financial resources.

These days the streets of Lilongwe’s old town show signs of economic life, the heave of people going about their business at the markets a far cry from 18 months ago, when the economy had ground to a halt.

Petrol and diesel are available again and the long lines at fuel pumps have disappeared. The transport sector is operating more effectively, ensuring goods in the local markets are replenished each week.

Loibhéad says Banda’s interventions also made a massive difference to NGOs because by floating the kwacha she “killed the black market more or less overnight”.

“This opened the door for international funds to come back in, and solved a lot of problems at the macro level. We can now carry out our work with a degree of certainty, which is needed if you are going to deliver development aid effectively,” he said.

Human rights
She also committed to upholding human rights, which her predecessor was accused of abusing when more than a dozen people died after he deployed the army to crush protests against his government in July 2011.

As a result the international donors initially came back on board, but a massive corruption scandal involving donor money and senior members of government that emerged in October 2013 has prompted them to suspend their direct budgetary support again.

In November foreign donors, including the IMF and European Union, withheld about €120 million after reports of rampant corruption and abuse of public funds by government officials emerged. It is estimated that the graft runs into tens of millions of euro.

This report was supported with a grant from the Simon Cumbers Media Fund