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Impacting lives through microcredit
I recently had the opportunity to travel to a rural district of Uganda where my friend Nick Smith founded and now operates the Buseesa Community Development Center (BCDC), a nonprofit organization dedicated to community development through microcredit loans. As president of BCDC, Nick has been helping Ugandans improve their lives since 2009. In the agricultural district of Kibaale, the average annual income is $300, making a seemingly small loan of $90 go a long way. Many villagers lack the capital to build brick houses, expand their farms, or even construct a proper latrine.
I caught up with Nick to find out more about microcredit loans and the impact they have on this small community, where the absence of formal banks and a heavy presence of predatory lenders is the norm.
Q: What is your organization's mission?
Nick Smith: The BCDC’s mission primarily focuses on microcredit. We give small loans to people to help them expand the size of their agricultural production. We also do some work with health – bringing in nurses – and we’ve just started a school.
Q: What is a "microcredit” loan?
NS: The idea of microcredit is simply to help people help themselves. Micro meaning “small,” meaning the loans are small relative to what we [Americans] are familiar with. Typically a microcredit loan can be $50 to a couple hundred dollars. In our context, it primarily goes to agriculture. About 15 or so percent goes towards shops or animal husbandry.
Q: Why are these loans so essential to local residents?
NS: The loans are essential to the local residents because the formal banking sector unintentionally doesn’t serve these types of communities. Either they are too far from the people or they don’t think these people can use loans. It’s one of the big misconceptions. Microcredit helps to dispel that idea that people don’t want to help themselves or they can’t help themselves. One of the benefits of microcredit is that it actually helps people build a credit history.
Q: Can you give an example of how a microcredit loan is put to use?
NS: So you take the typical loan – we start at about $90. Most of the time what you see is people use this to hire laborers to slash and help them plant additional acreage. Usually an individual farmer can plant something like half an acre to an acre by themselves. When people get these loans, they then expand to 1.5-2 acres. By planting more, they can produce more agriculture and sell it. Families use [profits] to pay school fees because, despite universal primary education, most villages don’t have such schools. And also for health care costs. When they have a biannual harvest, and you are helping them double – which is typically what we see, double their production – you’re seeing a doubling of income. That’s why when you visit somebody, it’s not uncommon after one or two years to see them begin construction on a brick house or to hear them tell you of putting their daughter or son in a secondary school for the first time – something nobody in their family had done in previous generations.
Click here to see more photos and videos from the author's trip to Uganda.
Q: You mentioned in the BCDC promotional video that these loans are especially empowering for women. Why is that?
NS: It’s empowering to women because they can pay the school fees, they can pay for the health care costs, they can begin constructing a house – something that they couldn’t do before. You also see empowerment through their ability to support themselves financially independent of their husband. Or because of that independence, they might be able to leave a bad relationship.
Q: How can people help?
NS: I think there are two things. One, people need to know in general who they are donating to because a lot of commercialized entities profit from borrowers and profit from people losing their land. People give...to entities that are called “microcredit” that have extortionary high-interest rates. How do you empower somebody or help promote economic development when they are being charged 60 percent interest?
I think there’s that and just small donations make the biggest difference. If somebody donates $50, they are donating somewhere between 80-85 percent of what we [typically] give out. And it actually goes a long way. Smaller donations like that do make a difference because in areas like this, the annual income is about $300. And it may seem like small money for us, but people live on the margins here. If you earn an extra $10, that may help you pay school fees or it may help you buy the medicine you need.