Self-Help Microfinance
Written by: K. Wilson- Chief Executive Officer, Farmers Pride International
Date: January 30, 2022
Subject: Starting a “Self-Help” Microfinance with FPI
Purpose/Preface: The purpose of this memorandum is to outline Microfinance structures &
techniques that are viable for Farmers Pride, and to outline how these programs could be both
initiated & maintained under FPI’s current operating structures and resource limitations
Background: What is Self-Help Microfinance?
Broadly speaking, self-help Microfinance finance refers to a very broad set of tools and micro
lending structures that derive startup capital from resources (however few) that are already
available within the beneficiary community. (This most typically includes the collective
savings of participating community members, pooled remittance income, and other locallyavailable assets.) Simply put: rather than relying on foreign donors/investors, these techniques
work by having communities come together and pool their assets together.
Broadly speaking, self-help finance refers to a set of tools and micro lending structures that
derive startup capital from resources (however few) that are already available within the
beneficiary community. (This most typically includes the collective savings of participating
community members, pooled remittance income, and other locally- available assets.)
Self-help micro-finance tools are commonly used & proven methods for rural income generation
in developing countries. Examples of such methods include savings/credit associations (VSLA
programs), solidarity groups, village savings/loans associations, as well as more specialized
structures, which FPI developed according to the local circumstances of each individual country.
At Farmers Pride International, our leadership will prioritize helping communities to develop and
to implement “self-help micro-lending” structures as a way to self-capitalize their own incomegenerating activities. Ultimately, “self-help” Microfinance encompasses a broad range of tools,
methodologies, and specialized instruments for micro-credits- but what all of these methods have
in common is that’s they empower entrepreneurs to pursue income-generations from their own
means, rather than relying on support from the international community that may not always be
available. (This is especially pertinent for, which will struggle to attract outside investment due
to its recent political/economic history &perceived fragility.)
To these ends, Farmers Pride believes that the widespread adoption and implementation of selfhelp financial tools can alleviate the challenges of lack of access to capital, credit, investments, and
other financial tools to help rural businesses be successful. Examples of such methods that are
common to include savings/credit associations (VSLA programs), solidarity groups, village
savings/loans associations, as well as more specialized structures.
Self-Help Microfinance
Methodology Overview: What “self-help” Microfinance techniques can work in ?
FPI’s strategic plan for calls for organizing local farmers into farmers associations and economic
empowerment cooperatives. These structures are intended to help farmers by increasing market
access, lowering production costs, and increasing long-run production capacity. Such structures are
a strong fit for several types of self-help Microfinance programs:
I. Savings-Based Financial Empowerment
The economic power of Farmers Associations & Economic Empowerment Groups lies in their
ability to collect dues and savings contributions from their members over an extended period of
time. If the association is large enough- and its members are making regular savings
contributions and/or dues payments- then over time, the association can have a considerable
amount of capital accumulated. These resources can be used in the following ways:
-) Making interest-bearing micro-credits to association members & their respective incomegenerating projects (This is called a VSLA program)
-) Making large-scale purchases (of land, seeds, inputs, tools, capital) on behalf of the entire
association’s membership
Both of these methods are described in detail below
I. Village Savings/Loan Association (VSLA)
VSLA is a method that has been tried often in - and when properly governed it has been
demonstrated to work well. Basically, VSLA is a group arrangement where community
members come together & pool their savings together over a period of time. After some time,
the total savings collected is used as a fund to make interest-bearing micro-credits to group
members.
All micro-credits will be repaid with interest, which means the the pool of loan able funds should
grow automatically over time.
II. Collective Daily Savings
Daily Savings would involve the entire membership & beneficiary population of FPI- coming
together to make large-scale collective investments in tools, land, or property that would benefit
all member IGAs.
Self-Help Microfinance
The program would work by having FPI- ’s members & beneficiaries set aside regular
contributions (made up of member savings and annual dues) over a long period of timetypically 6 to 12 months. At the end of this period, the groups would take what they’ve
collected to make a massive purchase that would benefit every farmer in the organization. (This
would include buying/renting land, property, industrial farming equipment, or another large
purchase too large to be financed by a VSLA)
This collective daily savings will allow FPI to make large-scale purchases or investments
that would normally lie beyond the scope or scale of a VSLA program. (VSLA benefits
individual entrepreneurs with micro-credits for small-scale purchases. Daily Savings
benefits the whole groups with large-scale purchases too large for VSLA to cover.)
Required Support Programming:
In order for either Microfinance program to work, there are number of support programs
that’s must be established first. Without these, self-help[ finance has a very poor chance to be
successful. These programs are:
I. Financial Literacy Training
Self-Help micro-finance requires fiscal discipline and financial literacy among its beneficiaries
in order to be optimally successful. This will include key topics such as personal savings, profit/
loss accounting, financial management, and project budgeting. (Fortunately, the FPI secretariat is
developing a standardized training manual that all of our country leaders can use/adopt for their
Communities.)
II. Business & Entrepreneurship skills Trainings
In order for Microfinance programs like VSLA to work, participants needs the skills to make
their businesses successful. (Models like VSLA depend on member savings. If the business
succeeds, members will have money for saving- and their saving lets the VSLA give out microcredits.) This means that FPI will need to support its Microfinance program with a strong
business skills program.
Self-Help Microfinance
Growth Proposition: How micro-credit scheme grows bigger
Self-Help Microfinance programs like VSLA grow because the members are able to contribute
savings over a period of time. If their businesses succeed, they will have money to save- and the
savings they collect enables the VSLA to make larger & larger micro-credits. This means that
the lending capacity of the program should get larger over time- as long as the businesses it
funds remain profitable.
This growth model is illustrated below, in Figure I. (Note: In reading the model, please note
that IGA stands for “Income Generating Activities”)
Self-Help Microfinance
Community Impact Proposition: How self-help micro-finance benefits the community The
second feedback loop (see Figure 2 below) illustrates how the growth of income-generating
activities & formal startups will benefit not just the program participants, but also the community
at large- creating multiple levels of private and social value