Understanding Nuru’s Savings-led Microfinance
“The loan contracts might be in that box. No, not that box. Don’t touch that box, it could explode.” I pause in my search for the contracts and turn slowly to look at Charles, our newest office clerk, calmly typing as if he had informed me that we are out of staples. We’ve recently moved to our semi-finished Nuru offices in Keborui. Most of the buildings are still under construction, so the few rooms that are complete are chaotic, shared space – crates of Water Guard next to boxes of loan documents next to, apparently, hazardous and explosive construction materials.
I march off to see the construction foreman about keeping the office out of blast range, but the image of loan contracts next to explosives makes me think about an article I read analyzing the recent microfinance crisis in Andhra Pradesh. Profit-driven companies, corrupt politics, and the tragic and desperate poor. In hindsight it was a time bomb, but this is a story we’ve heard before.
It’s hard to compare Nuru’s fledgling savings-led microcredit program with a microfinance giant like SKS, but there are important lessons for the CED team to remember as we scale. This week we held meetings in two new locations, Nyabikaye and Nyamaharaga, to form groups for our KAPESA group savings program. We’ve had to balance growth with operational capacity to take on new KAPESA locations. We also must know how to adapt our programs from Nyametaburo and Nyangiti. Nyabikaye is very different from Nyamaharaga, and both are different from our current locations.
What stands out to me most though, is how the CED Field Managers and loan officers introduced the CED program. Most of the demand for CED program services is actually rooted in loan demand. So the CED team has attended agriculture trainings to introduce the program and emphasize that the goal is not just to give loans. The goal is to drive economic development by first creating financial stability, through savings and training, then by increasing income through small business loans. I know the message got through because attendance dropped quickly when we focused on savings over loans. This may not be the way to fuel loan portfolio growth, but it is more responsible.
A loan is a loan. It is not empowerment, opportunity or hope by itself. During one of our meetings a farmer asked, “How will we get out of poverty if you don’t give us bigger loans?” A perception like this is a time bomb, and I definitely don’t need anything else explosive in my office. So I’m glad that the CED team will expand the program through savings, training, and greater understanding.