SACRAMENTO, California — Tom Eggert had an established career as a respected sustainability professor at the University of Wisconsin, Madison, and was prepared to retire in 2010. An encounter with a Haitian student radically changed Eggert’s retirement plan. Tom is now the founder of a fast-growing and successful nonprofit making a difference for many through micro-financial tools. Beginning in Haiti and continuing in the Philippines, Wisconsin Microfinance is making a difference one country at a time.
About Microfinance
The Cambridge dictionary defines microfinancing as “the activity or business of providing financial services to poor people or new businesses in poor countries.” “Financial services” manifests in different ways including savings, loans, remittances, payments and insurance. Various sources provide these services and many experts break the services down into three categories that include formal institutions, semi-formal institutions and informal sources. In essence, microfinance is a tool for development that utilizes financial tools ranging from savings to credit, which give many people the most vulnerable control over their own destiny.
Surprisingly, the size of the group that microfinancing would serve or people without access to essential formal financial tools is enormous. The Asian Development Bank contends that the number of adults across the globe who lack this access is 2.7 billion or 70% of the adult population in developing countries. The reason for the unbanked individuals includes ignorance, distance, a lack of funds and being unattractive to formal banking institutions.
Microfinance and Its Benefits
The benefits of microfinance for this group are immense, and they include more than just access to financial tools. PLAN International points to five critical benefits.
- Access.
- Better loan repayment rates.
- Improved education and health as families that utilize microfinancing are less likely to pull their kids out of school for economic reasons and are more likely to be able to afford school and health-related fees.
- Sustainability as groups who receive loans to start small businesses become self-sufficient, which can have a ripple effect on the local economy.
- Improved Income and nutrition.
At its core, microfinance provides hope through an opportunity for economic and social self-sustainability to those that otherwise would not have it. The impact expands beyond that to benefit the local community and acts as a ripple effect that helps the total GDP. Microfinance researchers Selim Raihan, S.R. Osmani and Baqui Khalili found that it added 8.9% to 11.9% to the GDP in Bangladesh.
How Wisconsin Microfinance is Making a Difference
With these advantages in mind, Tom Eggert started Wisconsin Microfinance to give hope and opportunity to those locked out of the system. The Wisconsin Microfinance website mission statement explains that “our mission is to use microfinance to empower aspiring entrepreneurs” and “we seek to reduce extreme poverty by providing access to capital in order to provide a hand up, not a handout.” As of right now, the nonprofit is focusing its resources on Léogân, Haiti and Bohol Island, Philippines.
As noted, the genesis of this idea began with a Haitian student in Eggert’s Fall 2009 course. In January 2010, an earthquake devastated Haiti and unbeknownst to Eggert’s student, he would be on the last flight out of Port-au-Prince before the disaster struck. After the devastation of the quake, Eggert and others in his course sprang into action to help. However, instead of focusing on providing the basic resources of water, food and shelter, the organization wanted to assist with helping those affected find self-sustainability and economic opportunity.
The 3 Guiding Practices
Tom and his group found inspiration and guidance in the example of the Nobel Prize winner, Muhammad Yunus and his Grameen Bank. Yunus established three guiding practices to ensure the success of its lending:
- Women-Centric Lending: Women are more reliable borrowers who use the money for businesses that microfinance institutions invest in and are more likely to reinvest their loans in their family or community.
- Group Lending: Group lending occurs in place of collateral that refuses any new loans until each member pays back theirs to promote supportive environments and ensure that borrowers pay back their loans.
- Loan Support and Education: Loan support and education allow borrowers to get the most out of their loan and experience.
For Wisconsin Microfinance, the success is in the numbers. After working with some local partners, the organization could provide 50 loans initially, all of which the borrowers paid back. Since 2010, the nonprofit has delivered more than 1,500 loans to Filipinos and Haitians. In total, the organization has circulated over $230,000 while boasting a 97% repayment rate. Eggert credits this success to the group lending practice mentioned earlier.
Peace-Corp Mentality
Eggert stated in an interview with The Borgen Project that what motivates him to do this work instead of retiring comes from his Peace Corps days where he coincidently volunteered in the Philippines for a couple of years. Eggert also stated that “This was one opportunity to…continue that goal of the Peace Corps,” which remains “to make a difference in people’s lives.”
At the core of his motivation, Eggert is trying to solve problems that others are not. Perhaps more telling, for Tom, the work will never reach completion. Eggert explained that the current status of the organization’s mission is that “There is so much more need out there” and “we will never be able to declare victory that we addressed all of the need out there.” This mentality and passion to help the most vulnerable among us is the key to how Wisconsin Microfinance is making a difference.
– Vincenzo Caporale
Photo: Flickr