Women Helping Women: Scripps Economics Society’s Micro-Finance Project

by Nikki Broderick SC '14

Rosa Ysabel Garcia Panta, 43-year-old mother of two, lives in a rural village near Tambogrande, Peru. Since her childhood she has worked on her family’s farm, in the fields and raising cattle. Now Rosa owns her own farm with her husband and wants to build a better life for her children.¹She wants to purchase more cattle and seed for a lemon grove. A $575 loan made Rosa’s story possible.

In the fall of 2011, the Scripps College Economics Society (SCES) decided to initiate a project involving micro-finance, making goals like Rosa’s attainable. “It came about by accident,” admits SCES President Leila Alhamoodah ‘12, although she “very quickly latched onto the idea.” Alhamoodah recalls meeting with SCES Board, bouncing around ideas until someone mentioned micro-loans.

Micro-finance, support given in through informal banks, makes loans like Rosa’s possible. Although not the first to come up with the idea of small loans for those in poverty, Dr. Mohammad Yunus is considered one of the pioneers of micro-finance. In 1976, he brought his graduate students to experiment with micro-credit and finance to women in Jobra, Bangladesh. He later established Grameen Bank, which spurred the creation of several other micro-finance institutions.²

In 2005, Matt Flannery and Jessica Jackley founded one of the world’s largest non-profit organizations created for microfinance, Kiva. This organization, with over 690,000 lenders, works with different small banks around the globe.

Rosa requested the loan from Edpyme Alterniva, an intermediary field partner that works with Kiva. Donors who see Rosa’s profile on their website are able to give any size donation to help her work towards her target amount.³After Kiva’s donors raise enough money for Rosa’s project, this money will be directed towards Edpyme Alterniva, one of Kiva’s field partners, now able to fulfill Rosa’s loan request.

The economic society’s project is part fundraising, part learning experience. The society collects donations from students, faculty, staff, and any who wish to donate to those in need of loans for their small businesses or other entrepreneurial endeavors. After deciding to start a project, SCES chose Kiva because it was an organization that all the board members had heard of before and felt it was a very reputable and successful organization where they felt secure putting their money.

“Even though we’re Scripps College Economics Society, we wanted to have an impact beyond Scripps,” explains Ina Herlihy ‘14, SCES Treasurer. With $825 in outside donations and using money from their own portfolio, the society has already loaned to 33 men and women in 14 countries around the world. The loans also cover a variety of sectors, including Food, Agriculture, and Retail.⁴

Those who lend to borrowers through Kiva are loaning from all over the world. Herlihy shares the shocking experience of browsing Kiva’s website and looking at a potential borrower: “The next day I checked back to see how much of their project had been funded. It had only taken one day to raise all of the money.” With the help of others, the society can fund a variety of projects without raising the entire sum; the community of lenders makes it possible for an expansive portfolio.

In addition to creating a broad portfolio, varying potential borrowers by country, partner, and sector, Alhamoodah comments that, “We’re looking for women building their own economic skills.” Although the society focuses on women with 78% of its loans directed towards them, it has also made loans to male borrowers.

From Dr. Yunus’ project in Bangladesh in 1976, micro-finance has been geared towards women due to the increased likelihood that they would pay back their loans, a disputed finding.⁵Due to this increased likelihood of specifically women paying back loans, the proponents of micro-finance often name women’s empowerment as one of the primary benefits of the practice.⁶

One potential critique to micro-finance is high interest rates or micro-finance organizations that, unlike Kiva, purposefully do not reach all members of a community. Some may argue that certain firms do not trust that lower-income residents will repay the debt. By extending services to some who may not otherwise be able to use a bank while only loaning to borrowers who are in the upper echelons of a rural village ensures that the firms will get a return. However, this practice leaves the “poorest of the poor” without the chance for economic development.⁷

Despite the uncertainty in lending to the very poor, Kiva.org boasts a 98.9% repayment rate, does not charge interest rates, and is a fully non-profit organization, raising funds through donations and grants.⁸When asked of the micro-finance debates, Alhamoodah responds, “”We recognize that micro-loans are still considered controversial, but we believe it’s very beneficial for students to work with borrowers and learn about micro-finance by managing their own portfolio.”

Alhamoodah continues, “This way students can learn from the experience by observing which loans are successfully repaid, which borrowers came back for another loan, where is there exchange rate loss, etc. Then students may make an informed decision about the usefulness of micro-finance.” Normally, it takes about eight months for a borrower to begin repayment on a loan; however, ten of SES’s borrowers have already started to repay their debts on time.

So far, the micro-loan project has been a success. The society has started to become a larger presence on campus, and expanding the society’s base to include charitable projects extends its members’ impact across and beyond campus. “I think it’s a good balance,” says Alhamoodah. “It’s a cross between charity and a student investment fund where we get to learn from the experience.” The society plans on maintaining the project, continually giving Scripps’s students the chance to become involved in an on-campus club with a global vision.

For more information on the Society’s current portfolio, or for a chance to donate, visit: https://community.scrippscollege.edu/econ/kiva

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