ETHIOPIA: A little money gets big results

Addis Ababa, 25 August 2008 (PlusNews) - Birkay Gadenah is not any bank's idea of a good credit risk. The 36-year-old mother of five lives in the tin-roof shantytown of Burayu, 12km west of the Ethiopian capital, Addis Ababa. But eight months ago, she and nine other women from the neighbourhood funeral society, or "edir", formed a community savings and loan group. "It has changed my life," she said.

In the previous year she was earning 90 Ethiopian Birr (US$9.38) a month, doing laundry for three neighbouring families. "It was very tiring work," she told IRIN/PlusNews.

With a 300 Birr (US$30) loan from the group, she started a business making beaded necklaces to sell in Addis's central market. Today she has quadrupled her income and though she is still a long way from a middle-class life, she says she'll be able to pay her loan back with interest when it falls due in three months. "I can sit at home with my children and get a rest," she said. 

Gadenah has an added incentive to repay her loan. If she defaults, she will be kicked out of the edir. Funeral societies are a pillar of Ethiopian life, even among the poorest of the poor. If a family member dies, members of the edir help pay for the burial and come to comfort survivors during the three-day mourning period.

"You're discriminated against if you're not a member of the edir," said Almaz Kebede, who also belongs to Gadenah's group. "No one will help you if your house burns; no one will bury you if you die."

Microfinance projects have taken off in developing countries in the past decade, a trend highlighted when businessman Muhammad Yunus won the Nobel Peace prize in 2006 for creating the microfinance Grameen Bank in his native Bangladesh.

Small financial cooperatives have been touted as a way to help poor communities like Burayu, which have been hard-hit by the HIV/AIDS epidemic. But they are no panacea.

One recent World Bank study in a district in Kenya found that more than 30 percent of recipients defaulted on their loans. In Burayu, however, the international aid group, CARE, hit on the tactic of linking savings and loan schemes to funeral societies, thus increasing social pressure on loan recipients to keep up their repayments.

The scheme itself is simple. Gadenah and nine of her friends in the Burayu neighbourhood – all members of the same funeral society – received training in how to set up a simple savings and loan programme as part of a project funded by CARE and the United States Agency for International Development (USAID).

For the past eight months, the women have met on Friday afternoons and each has put three Birr ($0.29) into a steel lockbox. Saving even that small amount of money hasn't been easy.

"We believed it was very difficult to save," said Kebede, whose husband died of an unknown illness more than a decade ago. "We are very poor, how can we save?"

The women in the group decided to cut back on one of the small luxuries in their lives: coffee. Ethiopia is widely thought to be the birthplace of coffee, and even in a poor neighbourhood like Burayu, women roast coffee beans three times a day as part of a coffee ceremony. By cutting back on coffee once a day, each was able to save enough for her weekly contribution.

Within months the group had enough to offer Gadenah a loan for her bead business and extend credit to Kebede to start a business baking "injera", a traditional Ethiopian sponge-bread made from "teff", a local grain.

If a recipient doesn't repay her loan plus three percent interest, the other members can report her to the head of their funeral society, who can expel her from the group. She will then face the social ostracism that comes from not belonging to an edir.

"It's like when a country doesn't abide by the rules of the United Nations, there is an embargo," explained Biniyam Habtewold, a programme manager for the Tesfa Social Development Association, an alliance of funeral societies.

So far the Burayu women's group hasn't had to kick anyone out, and the project looks to be a lifesaver for women living on the brink. Of the 10 members of the Burayu group, all of whom are under 50, eight are widows.

Many of the women say their husbands died of an unknown illness – often code for HIV/AIDS in a community where discrimination against those with the virus is widespread. Ethiopia's urban HIV/AIDS rate is about nine percent, but aid workers believe it is likely higher in Burayu because it has a long-distance bus station that may provide a route for transmission from other parts of the country.

Adama Tsehay's husband died seven years ago. Since then she has struggled to raise a family on a janitor's salary of 230 Birr (US$23.71) per month. A loan from the group has helped her start a business baking bread in the mornings before work.

Although rising food prices mean she's earning just enough to pay back her loan, her four children are now getting their breakfast from her output, a meal she couldn't provide before the savings and loan group was founded. "I have really benefited; it's helped me a lot to be independent," she said.

jm/kr/he

See also, UGANDA: Positive women taking their place in the economy

Theme (s): Economy, HIV/AIDS (PlusNews),

[This report does not necessarily reflect the views of the United Nations]