Lessons learned (3): Repayment of loans

In my previous articles I shared about how we addressed the written communication gap through the Business Model Canvas and how we help people set up a family budget. In this article I want to share the challenges we face around money lending and what we are learning.

To help the people we trained have access to capital, we occasionally set up a FaithFund. A FaithFund is a locally managed fund where people that have gone through a Pioneer Business Planting training can receive seed capital to start their businesses.

With setting up and running FaithFunds in Africa and Asia we have encountered several challenges:

  1. Money spend on other means than the business they want to start
    • Sometimes people spend the money that they have received as a loan on their personal or family means. For example, one person used part of the money to send his brother to university instead of buying supplies to start his business. The needs in the moment and the pressure from his family were more important to him than the possible rewards in the future.
  2. Not paying back on time
    • Most of the people we work with live under difficult circumstances. Problems like corruption and high inflation have a big impact on the businesses. A lot of times, this causes people to delay their loan repayments. Also, when there are expenses that need to be paid right now (e.g. school fees), the people use the money available to pay these expenses instead of paying back their loans.
  3. Not paying back at all
    • Sometimes people cannot pay back at all, because their business is not doing well, there is mismanagement of money or influences of external circumstances.
  4. No communication
    • Sometimes people don’t communicate about how their businesses are doing. When things go not as planned, they feel shame and are reluctant to communicate about their issues. Sometimes they completely disappear from the radar.

How are we overcoming these challenges? What are we learning?

First of all, we need to recognize that we cannot solve all the problems and challenges described above. A lot of the challenges, like politics and inflation, are beyond our control. Also, some behaviors are rooted into generations old world views, that are hard to change. But with Gods help we can try to adapt, improvise and overcome.  We are constantly learning and growing and don’t have all the answers.

These are the lessons we are learning and steps we are implementing to overcome the above challenges:

  1. We pray before, during and after a business is started. The most difficult part of starting a business is the spiritual warfare.
  2. The applicants need to have gone through the Pioneer Business Planting training and need to have a Business Model Canvas, Personal Budget and Business Budget ready.
  3. We do a thorough review of the Business Model Canvas, Personal Budget and Business Budget before we give a loan. Most of the people think that they will sell a lot, but in reality the sales projections are lower. We look at the risks and obstacles of the business and see what we can implement to prevent these problems to happen.
  4. We check their experience in the business they want to start. Do they know what they are doing?
  5. Our local leaders walk with them for some time before we give them a loan and see if they are trustworthy.
  6. We make a realistic plan of loan repayment, that takes into consideration problems and issues.
  7. Every business needs to do bookkeeping. We provide coaching and templates on how to do this.
  8. We make sure every person brings at least 10% of the money for the loan by themselves, before they receive a loan.
  9. We start small. We don’t give people “big” loans, but start small to test out if the business is working.
  10. Every person will receive a coach and needs to report to that coach on a weekly basis how the business is going.
  11. We make sure that a coach will collect the loan repayment on a weekly or daily basis. By assisting individuals in adopting this approach, they can establish a consistent repayment rhythm instead of delaying payments. Additionally, it allows for more frequent points of contact and coaching.

Recently, we have begun to explore an innovative approach by having a local entity acquire the assets for newly established ventures. Here’s how it works:

Imagine an individual who has completed the Pioneer Business Planting training and has developed a business concept centered around buffalo milk production. This person has meticulously prepared a Personal Budget, Business Model Canvas, and a Business Budget, demonstrating the viability of the business. To ensure a single family’s self-sufficiency, acquiring two buffaloes is necessary. In this scenario, the FaithFund steps in to purchase these buffaloes on behalf of the participant. The entrepreneur then proceeds to sell the milk, gradually repaying the cost of the buffaloes, along with a modest additional fee. Should there be cases of non-compliance or if the business fails to turn a profit, the FaithFund has the option to sell the buffaloes to recover the invested assets.

As you can see, working with startups in Africa and Asia is messy! There are a lot of downsides. But, that doesn’t mean we need to stop doing it. When something is difficult, we should persevere. We should adapt, improvise and overcome. The end goal is new disciples being made, churches and business planted so that transformation will take place in a community.

One Response

  1. Very true servant of the Lord. There are challenges with the loan repayment. But with the suggested guidelines hope sanity is gonna be realized.
    In all this though there ought to be a sense of integrity and openess. Guys we shouldn’t operate as the heathen. We should show some level of maturity. When you take a loan…put structures of repaying the same. My take though.

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