Thursday, November 29, 2012

Why Kiva lenders should fund consumer and housing microloans in Jordan

This post is by current Kiva Fellow Taline Khansa stationed in Jordan.

This week, I met a Jordanian widow who is supporting four children and her elderly mother on less than 200 JD (US$283) per month. Her income comes from her deceased spouse’s pension. She is applying for a microloan to make ends meet. Do you think this non-entrepreneur should be granted a microloan?

While you and I may be able to reach for a credit card or withdraw money from a savings account in case of emergencies or unexpected expenses, such luxuries are not available for the majority of the low-income population in Jordan. What is the solution, then, for marginalized communities?

One of the many low-income neighborhoods in Jordan.

One possible piece to the puzzle? Microfinance.

Microloans are not only about funding income generating projects; they can also help low-income communities meet their financial obligations and improve their living conditions.

Tamweelcom, a Kiva Field Partner, as well as many MFIs in Jordan, is increasing access to funds through “Housing Loans” for communities that may otherwise have no alternative sources of money when hit by a hardship.

What, exactly, are Jordanian MFIs doing?

- Providing their clients with small loans that they are otherwise unable to obtain from family, friends or traditional banking institutions.

- Creating loan products such as “Home Improvement” loans to separate consumer loans from entrepreneurial loans and maintain transparency within their own portfolios.

- Using a shared system among MFIs to evaluate the client’s ability to repay the consumer loan and ensure clients are not over indebted.

- Increasing their clients’ purchasing power to overcome unexpected circumstances and to improve their living conditions.

According to the World Bank, 13.3% of Jordan’s population is living under the poverty line. Compared to more developing countries, that percentage may seem low. But let’s look at the actual number: 800,000 people under poverty line. That’s 800,00 people living on less than $365 per month and attempting to overcome a multitude of challenges.

What are Jordanian low-income communities struggling with?

High Unemployment Rates: 18.3% for women compared with 10.7% for men. 27.2% of young people between ages 20 and 24 are unemployed. And it's important to note that more than 70% of the population is under age 30.

- High Cost of Living: In 2008, the Jordanian government increased its minimum wage to 150 JD (US$211). However, Jordan remains the fourth poorest country among the Arab states and one of the most expensive to live in. Low-income communities are making tough choices about whether to pay rent and electricity or keep their families fed.

- High Inflation Rates: In the first eight months of 2012, the average inflation rate has been 4.1%, a sharp increase from previous years according to a report by Jordan’s Department of Statistics, with transportation up 6.1%, dairy products 15%, meats 5.6% and rents 3.8%. This has been further fueled by a recent removal of fuel subsidies which has affected commodity prices across the board.

- Water Shortages: Jordanian homes receive water refills for their tanks only once a week. However, pumping interruptions are common, leaving low-income neighborhoods without water for indefinite periods of time.

Unsatisfactory solid waste management due to an increasing population, lack of funding at the local government level and insufficient community awareness.

The solid waste problem in the neighborhood of a Tamweelcom client.

- Improper insulation and water damage causing health problems: the following picture was actually taken inside the home of a Kiva client. She had to admit her twin children to the hospital after they developed respiratory problems caused by the water damage. She's using her “home improvement” microloan to repair her home and give her children better living conditions.

Water damage in the home of a Kiva borrower.

Why should Kiva lenders fund housing or consumer micoloans?

- Because low-income communities deserve a chance to improve their living conditions.

- Because the psychological alleviation of poverty is just as important as the physical alleviation of poverty.

- Because everyone deserves to live a dignified life.

- Because all borrowers – without exception – I have met who have taken out a consumer microloan have been thankful for their blessings and optimistic about their future, regardless of all struggles and challenges facing them.

As of today, Tamweelcom has 87 housing loans expiring within the next 2 to 7 days on Kiva. True, these are not income generating projects, but they are loans that keep a family fed, sheltered, healthy, and able sustain itself.

So now I ask the question again. Do you think these borrowers should be granted a microloan?

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