Fighting Poverty

Savings
Many people, if they are not part of a formal banking system, have informal ways of saving. For example they may buy animals or goods that can be sold off later, or they may stash their money under the bed, or collect building materials for future construction. These methods of saving are risky, and people who use these methods often lose around a quarter of what they save [1]. These assets are also illiquid. That is, they may be difficult to sell in order to gain cash. Assets such as animals cannot be sold in parts if the owner needs a small amount of cash. Formal savings accounts allow these people to keep their money safe and accessible when they need it.

Credit
Credit is crucial to the creating and operation of small business and agriculture. For example, a farmer who wants to start growing corn would first need some money to purchase the necessary seed and tools to cultivate his farm. Microfinance organizations, such as CEFA can provide this money in order to get small enterprises started. Credit may also be needed to expand existing small business through expansion or improvement. Credit also allows borrowers to spread out large expenses over a more manageable time period. This helps, for example, if the borrower has unexpected medical fees or a wedding. The borrower can pay back these expenses in smaller quantities over a period of time.

[1] Graham A.N. Wright and Leonard Mutesasira. The relative risks to the savings of poor people, Micro-Save Africa, January, 2001.