How lending to the poor pays off

How lending to the poor pays off

It is a rain-sodden day in Fushë Kosovë/Kosovo Polje, on the outskirts of Prishtina, Kosovo. Deep puddles span the dirt roads and stray dogs forage in the rubbish, while groups of men congregate idly near decayed warehouses.

Yet despite the economically depressed environment, the Ashkali, an impoverished Albanian-speaking minority group, is making good use of new opportunities to earn a living. Change is happening fast.

In January 2007, a World Vision Micro Finance Institution, KosInvest, began granting loans to the Ashkali as part of its overall strategy to spur economic development in Kosovo. Micro-lending services were offered to rural entrepreneurs, especially the most marginalised people.

Scepticism

The decision was greeted with scepticism by other organisations due to the Ashkali’s perceived inability to pay back the loans.

“They thought we were crazy,” recalls Loan Officer Nexhmi Ademi.

“When I first came, even the Ashkali thought I was joking.

“They couldn’t believe that someone would be prepared to lend to them! It seemed too good to be true.

“We are geared to poor families who have an idea and are willing to work at it, but need finance.”

Village Association

So far, between 50 and 60 small business loans have been granted. The results are very positive.

“Some people think that lending to the poor is risky, but so far none of our clients from this community have been even one day late in their repayments,” Nexhmi says.

“It motivates me to do as much for them as possible.”

World Vision and KosInvest started a Village Association in December 2006 to help the area’s 600 Ashkali families and 100 Roma, another ethnic minority group. Community member Rexhep Hyseni was elected deputy leader of the Village Association and is very active in his voluntary role.

Community benefit

Rexhep himself began building a small shop in May but was unable to get a loan to complete it because he didn’t fit the banks’ income criteria. However, with a loan from KosInvest, he was able to finish construction and begin sales.

“Those who receive the loan benefit, but so does the rest of the community,” Rexhep explains.

“There was a great need for a general shop here offering basic products.

“The items I sell here weren’t available locally and people had to walk more than two kilometres to stores in town.”

Rexhep and one of his adult sons now work together in the shop. The takings support the family of nine, including five children aged between one and six.

“Life is tough for this community and without employment, nothing is available to us.

“We need to work to get a better life, so these initiatives are very important.”

Rexhep is a key contact for other potential loan recipients in the village. Though they lack material goods as collateral, he is consulted on their character instead.

Chickens

One of the first villagers to hear about the availability of loans was Bislim Geri. He had been living in Germany with his wife and children and had returned to Kosovo without a job.

Bislim requested a loan to raise chickens. He had the right certification and some experience, but no shelter for the birds or money to start up.

Loan Officer Nexhmi explains that despite his initial doubts, Bislim and his wife Hyra were offered a loan of 1,500 Euros (US $2,130) after Rexhep gave a character endorsement. The couple immediately constructed a simple shed against the wall of their unfinished house, and bought the chicks and feed.

The Geris have already raised 700 chickens and have 300 more still growing, with a potential value of around 4,000 Euros (US $5,680). There is a good local market for chickens.

“It opened the road”

Nexhmi is impressed at Bislim’s rapid progress.

“When I see someone’s success, I feel good, as if I am part of it.

"It’s as though they create something from nothing.”

“Without this loan I wouldn’t have been able to start this business; it opened the road,” says Bislim.

“The risk is small, but the encouragement is great. If it goes well, it will give me hope for a better life, otherwise things would be very bad.

“Without any income it’s tough, not only for me, but for everyone in my family.”

Bislim’s children, who are 9, 12 and 15, are as many as six years behind in school, so they have had to start in introductory grades. Like several generations of Ashkali they have missed out on education; it is not unusual for loan recipients to sign documents with a fingerprint because they don’t know how to read and write. The Village Association is helping to teach catch-up classes to local youth.

Internet café

The unemployment rate in Kosovo is high generally, but particularly among the Ashkali, where out of a community of 600 families, only around 20 people have regular jobs. Those who don’t have work sit alongside the road and watch the cars go by, perhaps getting occasional lifting jobs at the train station. Some collect scrap metal for re-sale.

Just a stone’s throw away, however, is 23-year-old Naim Miftari’s new Internet café. He had only received a loan the preceding week but already the small office is fitted with four second-hand computers.

Naim explains that a lot of people from this community are now living outside of Kosovo, so people need to communicate with their relatives. Their nearest alternative Internet café is in another town, an Albanian community where the Ashkali feel unwelcome.

Unfortunately there is no electricity today in this part of town, a problem that regularly affects all of Kosovo. Naim will need to get a small generator to maintain the power supply. He plans to open from 9am until midnight, assisted by his 26-year-old brother Rasim, charging a rate the locals can afford: 50 cents per hour.

“Without a loan I wouldn’t be able to do this, and I had no other job,” he says.

Travelling back into Prishtina, jostling among lorries, cars and military vehicles on the congested highway is a man driving a horse-drawn wagon. He suddenly waves and Nexhmi points out, “That’s another one of our Ashkali clients – his wife took a loan for livestock.”