Social micro-loans and training for 50 micro-entrepreneurs in Sierra Leone

After the success of our micro-loan and training project in Freetown, Sierra Leone, this proposal seeks to deploy a further £4,000, which will be used to provide training and circular loans to 50 micro-entrepreneurs in Waterloo, Sierra Leone.

Each entrepreneur will be provided with approximately £80 in funding plus socio-economic training and ongoing support(social counselling and individual follow-up) to help make their businesses profitable, organised and carried out by our partners Munafa Social Microfinance.

A country of small enterprises

The population in Sierra Leone is mostly rural (62%) and mostly young (42%). 70% of young people are unemployed or underemployed.

To make a living, many people run informal businesses like small grocery shops, workshops, peasant farming or livestock, hawking, cooking, etc. However, they often lack access to affordable funding and training to make their businesses more profitable and improve their problem-solving and decision-making ability.

The case for social micro-loans

Typical microfinance aims to help the most disadvantaged entrepreneurs access financial services to develop a revenue-generating business, thereby improving their living conditions.

Unfortunately, this sector is prone to abuse, as lenders seek profitability above positive social impact.

With social micro-loans, entrepreneurs are not only provided with capital but are also supported in their business and day to day lives. Special care is taken to ensure the entrepreneur remains in good standing by adapting the lending and repayment terms to the needs of each entrepreneur, the seasonality of their business and their ability to pay.

Solution

In partnership with Munafa, we will fund two groups comprising of 50 entrepreneurs in Waterloo.

Before receiving funding, the selected group of entrepreneurs will receive six initial training sessions delivered by Munafa. After this, they will receive individual loans based on their business needs and their capacity to repay, without the need for collateral or joint liability.

In addition to the business loans, the entrepreneurs will receive education about savings and receive help to establish a personal saving plan.

Twice a month, field officers will meet the entrepreneurs in groups. During these bi-weekly meetings, Munafa field officers will manage the loan repayments and savings collection and provide training on economic and social topics to help entrepreneurs strengthen their businesses and their families and communities.

Why we partnered with Munafa

Munafa utilises a well tested social approach to doing business as a microfinance institution. They recognise that the entrepreneurs they lend to may at times lack the knowledge on how to do business properly. In addition, these entrepreneurs usually have social issues that may affect the financial performance of their loans when doing business.

Munafa employs social workers to help entrepreneurs solve social issues. These workers provide ongoing training with partners every two weeks on social topics such as “Preventing marital violence” and economics topics like “How to calculate sales price”.

Munafa provides one of the lowest interest rates to meet the needs of local entrepreneurs, and the entrepreneurs are referred and assisted in accessing loans from more formal SME institutions when loan requests exceed Munafa’s ceiling (approx. £800)

Impact

With a loan of £80 today, the entrepreneurs are assured of getting £800 in 2-3 years if their business is positively impacted and maintains sustained growth.

This business success will increase opportunities for the entrepreneurs, their families, and their local communities. At least 20% of the entrepreneurs will be start-ups.