NILE LOAN OF LIFE

Building financial systems for the poor  

    NILE loans that change lives in Africa

What We Do

We Let You Loan to the Working Poor

The NILE's mission is to connect people through lending for the sake of alleviating poverty.

The NILE is one of the UK's African led person-to-person micro-lending community organisations, empowering individuals to lend directly to unique entrepreneurs in the developing world.

The NILE has funded seed capital as loans to small entrepreneurs in Uganda. Loans of 50,000 Ugandan Shillings (£20) are enough for people to begin in self-employment.

What do these entrepreneurs do?

Small shops, a dairy, raising poultry as broilers or layers, raising rabbits, transporting goods to market, buy a fridge to sell cold drinks/water, opening up a home as a hotel, making pottery, selling ripe bananas, mangoes and other fruits, making and selling mandazi, samosas and chapati, tailoring, starting door-to-door clothes selling.

Initial loans get people started. Some people work in pairs. Starting with any small project of their choice, people often will move on to larger projects when they have saved enough. If you have a fridge, cow, rabbits etc you can support your family. The NILE does not loan the money directly but supports our partners in Africa in delivering and administering the schemes. Partners in Africa have this capability and monitoring of progress is a key element of success.

The NILE partners with existing grassroots organisations. In doing so, we gain access to outstanding entrepreneurs from impoverished communities in Africa. Our partners are experts in choosing qualified entrepreneurs. That said, they are usually short on funds. When you donate, not only do you get a unique experience connecting to a specific entrepreneur on the other side of the planet, but our partners can do more of what they do, more efficiently.

The NILE provides a transparent lending platform. We are constantly working to make the system more transparent to show how money flows throughout the entire cycle, and what effect it has on the people and institutions lending it, borrowing it, and managing it along the way. To do this, we are using the power of the internet to facilitate one-to-one connections that were previously prohibitively expensive. Child sponsorship has always been a high overhead business. The NILE creates a similar interpersonal connection at much lower costs due to the instant, inexpensive nature of internet delivery. The individuals featured on our website are real people who need a loan and are waiting for socially-minded individuals like you to lend them money.

How The NILE Loan of Life Works

The information below shows briefly how money gets from you to an African entrepreneur.

1) Donars like you donate to The NILE using PayPal or their credit cards, The NILE collects the funds and then passes them along to one of our partners in Africa.

2) The NILE's partners distribute the loan funds to the selected entrepreneur. Often, our partners also provide training and other assistance to maximize the entrepreneur's chances of success.

3) Over time, the entrepreneur repays their loan.

Information for Prospective Partners

Do you need additional information? Do you have a recommendation for a Field Partner? Wondering why The NILE Loans of Life does not have a partner in any African country you wish to nominate? Are you an organization looking for a different type of partnership?

Then please contact us.

Interested in partnering with NILE Loans of Life?

In order to become a Partner with The NILE, an organisation  must, at a minimum:

If you think you fit the minimum criteria, then please email us to apply.

Operational Requirements

In order to work effectively with The NILE, a partner organisation must be able to:

Minimum Criteria for Field Partners

In order to become a Partner with The NILE, a partner organisation must, at a minimum:

• Have a history (at least 1-2 years) of lending to poor, excluded, and/or vulnerable people for the purpose of alleviating poverty or reducing vulnerability
• Be registered as a legal entity in its African country of operation
• Have at least 1 year of financial audits

In addition to the minimum criteria listed above, the partnership selection process is influenced by several additional factors, including: The NILE's need to balance risk in our portfolio, region, lender-demand and other factors. These factors change regularly but are important pieces in the approval process. If your organisation fits the minimum criteria above, learn how to proceed in applying to become a NILE Loans of Life Field Partner.

If your organisation does not fit the criteria or operational requirements listed above, please contact us with your details and we may find other ways of supporting your organisation.

About Microfinance

This section contains information we have gathered from microfinance organizations we respect to help answer some of your questions.

FAQs about Microfinance

1. What is microfinance?
2. What is an MFI?
3. Why would poor people need financial services?
4. Why don't they just go to a bank?
5. Why don't banks accommodate poor people?
6. Why are microcredit interest rates so high?
7. What are the effects of microfinance?
8. When is microcredit not appropriate?
9. Why do so many MFIs focus on women?  

1. What is microfinance?

"Microfinance is the supply of loans, savings, and other basic financial services to the poor." (CGAP)

As the financial services of microfinance usually involve small amounts of money – small loans, small savings etc. – the term "microfinance" helps to differentiate these services from those which formal banks provide.

Why are they small? Someone who doesn't have a lot of money isn't likely to want to take out a $5,000 loan, or be able to open a savings account with an opening balance of $1,000. Hence – "micro".

2. What is an MFI?

A microfinance institution (MFI) is an organization that provides microfinance services, ranging from small non-profit organizations to large commercial banks.

"Historical context can help explain how specialized MFIs developed over the last few decades. Between the 1950s and 1970s, governments and donors focused on providing subsidized agricultural credit to small and marginal farmers, in hopes of raising productivity and incomes. During the 1980s, microenterprise credit concentrated on providing loans to poor women to invest in tiny businesses, enabling them to accumulate assets and raise household income and welfare. These experiments resulted in the emergence of nongovernmental organizations (NGOs) that provided financial services for the poor. In the 1990s, many of these institutions transformed themselves into formal financial institutions in order to access and on-lend client savings, thus enhancing their outreach.

An MFI can be broadly defined as any organization—credit union, down-scaled commercial bank, financial NGO, or credit cooperative—that provides financial services for the poor." (CGAP)

"The World Bank estimates that there are now over 7000 microfinance institutions, serving some 16 million poor people in developing countries. The total cash turnover of MFIs world-wide is estimated at US$2.5 billion and the potential for new growth is outstanding." - Data Snapshots on Microfinance - The Virtual Library on Microcredit

3. Why would poor people need financial services?

"The great challenge before us is to address the constraints that exclude people from full participation in the financial sector... Together, we can and must build inclusive financial sectors that help people improve their lives."

- Kofi Annan, UN Secretary General

It's easy to imagine poor people don't need financial services, but when you think about it they are using these services already, although they might look a little different.

"Poor people save all the time, although mostly in informal ways. They invest in assets such as gold, jewellery, domestic animals, building materials, and things that can be easily exchanged for cash. They may set aside corn from their harvest to sell at a later date. They bury cash in the garden or stash it under the mattress. They participate in informal savings groups where everyone contributes a small amount of cash each day, week, or month, and is successively awarded the pot on a rotating basis. Some of these groups allow members to borrow from the pot as well. The poor also give their money to neighbours to hold or pay local cash collectors to keep it safe.

However widely used, informal savings mechanisms have serious limitations. It is not possible, for example, to cut a leg off a goat when the family suddenly needs a small amount of cash. In-kind savings are subject to fluctuations in commodity prices, destruction by insects, fire, thieves, or illness (in the case of livestock). Informal rotating savings groups tend to be small and rotate limited amounts of money. Moreover, these groups often require rigid amounts of money at set intervals and do not react to changes in their members' ability to save. Perhaps most importantly, the poor are more likely to lose their money through fraud or mismanagement in informal savings arrangements than are depositors in formal financial institutions."- (CGAP)

4.  Why don't they just go to a bank?

"The poor rarely access services through the formal financial sector. They address their need for financial services through a variety of financial relationships, mostly informal." (CGAP)

Why is this? For a moment pretend that you are a poor goat herder walking into a bank: 

• You don't have any money to open a savings account with
• You don't have any collateral to secure a loan with
• You don't have a credit record as you have never been formally employed and you've never taken out a loan before
• You might even be unable to complete the necessary paperwork as you are illiterate.

Formal financial institutions were not designed to help those who don't already have financial assets – they were designed to help those who do. Imagine trying to get a loan in the United States without any savings, an employer or a credit report.

So what do poor people do?

"Credit is available from informal commercial and non-commercial money-lenders but usually at a very high cost to borrowers. Savings services are available through a variety of informal relationships like savings clubs, rotating savings and credit associations, and mutual insurance societies that have a tendency to be erratic and insecure." (CGAP)

"Poverty is not created by the poor. It is created by the structures of society and the policies pursued by society. Change the structure as we are doing in Bangladesh, and you will see that the poor change their own lives. Grameen's experience demonstrates that, given the support of financial capital, however small, the poor are fully capable of improving their lives." - Banker to the Poor

- Muhammad Yunus, Grameen Bank, Founder

5. Why don't banks accommodate poor people?

Some do. Grameen Bank in Bangladesh was formed out of a project providing small loans to women in the village of Jobra. Bancosol, a commercial bank in Bolivia, is also a bank which provides microfinance services for the poor of Bolivia.

However, the majority of formal banks do not provide microfinance products as microfinance is an expensive enterprise – you can make a lot more money on a large loan than a small loan, and you won't make much money holding savings accounts with very little funds in them. Banks can make more money if they only provide financial services to those who already have money.

6.  Why are microcredit interest rates so high?

The nature of microcredit – small loans – is such that interest rates need to be high to return the cost of the loan.

"There are three kinds of costs the MFI has to cover when it makes microloans. The first two, the cost of the money that it lends and the cost of loan defaults, are proportional to the amount lent. For instance, if the cost paid by the MFI for the money it lends is 10%, and it experiences defaults of 1% of the amount lent, then these two costs will total $11 for a loan of $100, and $55 for a loan of $500. An interest rate of 11% of the loan amount thus covers both these costs for either loan.

The third type of cost, transaction costs, is not proportional to the amount lent. The transaction cost of the $500 loan is not much different from the transaction cost of the $100 loan. Both loans require roughly the same amount of staff time for meeting with the borrower to appraise the loan, processing the loan disbursement and repayments, and follow-up monitoring. Suppose that the transaction cost is $25 per loan and that the loans are for one year. To break even on the $500 loan, the MFI would need to collect interest of $50 + 5 + $25 = $80, which represents an annual interest rate of 16%. To break even on the $100 loan, the MFI would need to collect interest of $10 + 1 + $25 = $36, which is an interest rate of 36%. At first glance, a rate this high looks abusive to many people, especially when the clients are poor. But in fact, this interest rate simply reflects the basic reality that when loan sizes get very small, transaction costs loom larger because these costs can't be cut below certain minimums." (CGAP)

7.  What are the effects of microfinance?

"Several years ago two friends of mine were speaking with a group of 40 clients at a micro-bank in South Asia. Through the translator, they asked the 40 women what impact the bank had had on the husbands of the non-borrowers; not their husbands, but the husbands of women who are not with the bank. The clients said, 'Before we took our loans, our husbands were day-labourers, working for others whenever they could find work. When we took our loans our husbands stopped being day-labourers and worked with us - bicycle rickshaw, husking rice, growing garlic on leased land. This caused a shortage of day-labourers in this area, so the husbands of the non-borrowers who were day-labourers-their wages went up.' That was the impact of this bank on the husbands of the non-borrowers."

- Sam Daley-Harris, Microcredit Summit Campaign, Director

"Comprehensive impact studies have demonstrated that:

1.  
   • Microfinance helps very poor households meet basic needs and protect against risks;
   • The use of financial services by low-income households is associated with improvements in household economic welfare and enterprise stability or growth;
   • By supporting women's economic participation, microfinance helps to empower women, thus promoting gender-equity and improving household well-being;
   • For almost all significant impacts, the magnitude of impact is positively related to the length of time that clients have been in the programme." (UNCDF Microfinance)

"Poor people, with access to savings, credit, insurance, and other financial services, are more resilient and better able to cope with the everyday crises they face. Even the most rigorous econometric studies have proven that microfinance can smooth consumption levels and significantly reduce the need to sell assets to meet basic needs. With access to microinsurance, poor people can cope with sudden increased expenses associated with death, serious illness, and loss of assets.

Access to credit allows poor people to take advantage of economic opportunities. While increased earnings are by no means automatic, clients have overwhelmingly demonstrated that reliable sources of credit provide a fundamental basis for planning and expanding business activities. Many studies show that clients who join and stay in programs have better economic conditions than non-clients, suggesting that programs contribute to these improvements. A few studies have also shown that over a long period of time many clients do actually graduate out of poverty.

By reducing vulnerability and increasing earnings and savings, financial services allow poor households to make the transformation from "every-day survival" to "planning for the future." Households are able to send more children to school for longer periods and to make greater investments in their children's education. Increased earnings from financial services lead to better nutrition and better living conditions, which translates into a lower incidence of illness. Increased earnings also mean that clients may seek out and pay for health care services when needed, rather than go without or wait until their health seriously deteriorates." (CGAP)

"Empirical evidence shows that, among the poor, those participating in microfinance programs who had access to financial services were able to improve their well-being—both at the individual and household level—much more than those who did not have access to financial services. 

• In Bangladesh, Bangladesh Rural Advancement Committee (BRAC) clients increased household expenditures by 28% and assets by 112%. The incomes of Grameen members were 43% higher than incomes in non-program villages.
• In El Salvador, the weekly income of FINCA clients increased on average by 145%.
• In India, half of SHARE clients graduated out of poverty.
• In Ghana, 80% of clients of Freedom from Hunger had secondary income sources, compared to 50% for non-clients.
• In Lombok, Indonesia, the average income of Bank Rakyat Indonesia (BRI) borrowers increased by 112%, and 90% of households graduated out of poverty.
• In Vietnam, Save the Children clients reduced food deficits from three months to one month." (CGAP)

8.  When is microcredit not appropriate?

"Microcredit may be inappropriate where conditions pose severe challenges to loan repayment. For example, populations that are geographically dispersed or have a high incidence of disease may not be suitable microfinance clients. In these cases, grants, infrastructure improvements or education and training programmes are more effective. For microcredit to be appropriate, the clients must have the capacity to repay the loan under the terms by which it is provided." (International Year of Microcredit)

      9.    Why do so many MFIs focus on women?

"Today I'm a very respected women in the community. I have come out of the crowd of women who are looked down upon. Due to the loan that I received... you have made me to be a champion out of nobody."

- Rose Athieno, Produce Reseller, Uganda

"Microfinance programs have generally targeted poor women. By providing access to financial services only through women—making women responsible for loans, ensuring repayment through women, maintaining savings accounts for women, providing insurance coverage through women—microfinance programs send a strong message to households as well as to communities.

Many qualitative and quantitative studies have documented how access to financial services has improved the status of women within the family and the community. Women have become more assertive and confident. In regions where women's mobility is strictly regulated, women have become more visible and are better able to negotiate the public sphere. Women own assets, including land and housing, and play a stronger role in decision making.