Business

Karmic borrowing: Micro-lending based on good deeds

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Media captionTwo separate schemes in Thailand and Jordan are helping empower communities who have no collateral

What do you do if you need to borrow money but the bank turns you down?

Well, if you have the potential for good karma, you may consider signing up to Buddhist monk Phra Subin Paneeto's micro-lending scheme, which is spreading across Asia, as Hoang Nguyen finds out.

Meanwhile, Carolina Valladares and Mohamad Chreyteh head to Jordan to find out how aspiring businesswomen are bypassing the banks.

No collateral? No problem....


Sajja Sasom Sab, Thailand

Image caption The scheme, known as Sajja Sasom Sab, is run as a co-operative

For the past 24 years, Buddhist monk Phra Subin Paneeto has been the go-to guy for Thai people who need a loan but can't go to a bank as they have no assets a financial institution would be prepared to lend against.

Phra Subin Paneeto, however, has faith in something he believes is far more powerful: the rule of karma.

In the 1980s, the monk witnessed first-hand the poverty and social problems affecting Thailand's remote towns and provinces after he embarked on a country-wide pilgrimage.

But it was not until 1992 that he could gather enough support to start a micro-lending operation to help local villagers in the southern province of Trad to deal with their money-related difficulties.

The scheme, which combines Buddhist teachings with a community-based management method, has resulted in a micro-banking network, which today holds $63m (£43m) of deposits and loans.

Borrowers take out loans for necessities such as food, clothing, medicine and home repairs. Some also seek larger sums for building houses and purchasing land for cultivation.

The scheme, known as Sajja Sasom Sab, is run as a co-operative, accepting only people who live locally. Members contribute a small amount monthly.

The reason they choose to take out loans from this scheme instead of going to banks is because banks require collateral and credit history.

Rule of karma

Image caption Borrowers can't drink alcohol if they are applying for the micro-lending scheme run by Phra Subin Paneeto

However, borrowers, who are also depositors, pay low or even no interest when they take out the loans. There are conditions though. They have to find at least three guarantors to whom they are not related.

"I'd say to them the money in the community must not be lost; so people need to solve the problem together with the community, by the community and for the community. They can't take out the loan and not pay it back," Phra Subin Paneeto warns. "So anyone who is not honest, there won't be anyone willing to be his guarantor."

He believes that this screening mechanism not only ensures that all members have their say in how the scheme should work but also helps the community to come up with its own solutions to the problems members face.

"This is called the rule of karma, the joint action in the community," he says.

His micro-lending network has spread across 40 provinces in Thailand, with similar schemes introduced in neighbouring Laos and Myanmar.

He says there have been problems in remote parts of Thailand due to ageing populations and a shortage of young, educated workers. Also, much of the countryside's population relies on the agriculture sector, which does not necessarily provide social security.

Therefore any profits the scheme produces are used to take care of the elderly or the sick in the villages instead of being shared out as dividends.

"I always say: do not focus on the profit but on the welfare of the people and the community instead," Phra Subin Paneeto explains.


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Microfund for Women, Jordan

Image caption Raeda Jaryan has expanded her business after being able to persuade the lenders to give her more

Every week Raeda Jaryan drives her car to see Abu Ali, the owner of a banana tree plantation in the Jordan Valley. They greet each other cheerfully, drink tea, and later, they discuss business.

For the next half an hour, she will carefully choose the dried leaves that will adorn her handcrafted baskets.

In Jordan, a country were most women in rural areas are meant to stay at home, with little prospect for employment, Mrs Jaryan had hoped for a better future.

But Mrs Jaryan is a woman who likes to forge her own path and after taking a course on how to make baskets out of banana leaves she turned to a Microfund for Women (MFW) branch in her area asking for a loan.

She impressed them and returned home with not one, but two loans. And with that money she expanded her business, employed several women in her community, and started contributing to the income of her household.

Secret society

During the past 20 years, about 125,000 women have benefited from MFW, a microfinance institution in Jordan focused on helping poor women with no assets to get out of poverty.

The programme began as a Save the Children initiative in 1994 before operating as a local NGO called the Jordanian Women's Development Society. It went through yet another change in 1999 when it was registered as a not-for-profit limited liability company.

But its success has not been the result of a smooth pathway.

"Women initially came to us in secret. It was not culturally acceptable for a woman to take out a loan. Their husbands were not happy about it and they would come and say to us, 'We are going to take this loan but please can you make sure no-one knows about it,'" says Muna Sukhtian, the chief executive of MFW.

There are 54 branches across Jordan. And, surprisingly, over time it has become common practice for men to ask for a loan too.

"That shows that changes happen," Ms Sukhtian points out.

Image caption Before women would borrow money in secret... not any more, says Muna Sukhtian

Yet, challenges persist. Still many women in Jordan, and all over the world, have no access to financial services because they have no assets to begin with, so conventional banks will not lend money to them.

According to the UN, globally women are far less likely to have a bank account than men, with the gap widest in South Asia, the Middle East and North Africa.

On paper, lending money to poor women with no business experience could be seen as a very risky enterprise. But MFW hasn't found this to be a problem.

Since the scheme began, MFW has given more than 816,000 loans with 96% to women between the ages of 18 to 60. It has become one of the main microfinance institutions in the country.

But, Ms Sukhtian says, they still have a long way to go.

"We exist because we want to empower women, and it is known all over the world, women are the ones with the highest burden of financial challenges that come because of poverty."

She wants to expand the powerful enterprise throughout the region, and has no plans to slow down.

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