Microfinance is the supply of small loans (as little as £20) and other basic financial services to the poor who do not have access to formal banking systems.
One of the benefits of microfinance is that the poor do not have assets but they can still acquire loans based on their reputation within their communities. Ideally, they can avoid high interest rates which sometimes force them to rely on loan sharks.
Therefore, to work, interest rates on loans need to be high enough to return the cost of the loan plus the cost of potential defaults and local administration.
Where microfinance succeeds is in regions where conditions and processes enable the loan repayment.
Microfinance is generally not the best tool in war zones, locations where there is much disease or communities are widely dispersed.
As a tool, microfinance is best used in conjunction with the establishment of local businesses in order to ensure that the venture is sustainable rather than just providing aid.
Microfinance has historically been for profit with local money lenders or loan sharks taking a large profit ensuring that the communities to which they lend remain in poverty.
We are one of the few not-for-profit organizations and all funds are used for social ends to promote entrepreneurship and sustainability.
The management team has unrivalled experience in investment, technology and training and a broad international network.
Historical track record of work within the region focused on strong partnerships at a professional and personal level with local partners.
Development focused rather than just providing aid. By providing training, technology and capital, positive knock on effects are realized across the community.
Sustainability is of critical importance. The communities that Shanti works with are ones with long-term sustainable visions and goals.
Strategic partnerships with corporations to facilitate lending and training for entrepreneurs.
No bias towards religion or caste. Many MFIs work with a particular group whilst Shanti places no emphasis on gender, age, religion or caste.
Shanti provides an ability for a wide range of stakeholders to participate in grass roots development and philanthropy opportunities without the need to build their own corporate social responsibility strategies.
Shanti currently has a focussed approach in Gujarat working with entrepreneurs who have a keen interest in leveraging microfinance and technology in order to build their businesses and sustain their communities.
Donations are sought online, in person and through events in order to provide funds to be lent out to local partners who in turn have a contracted mandate to conduct the loan process.
The loan recipients do not have collateral, they guarantee the loans taken by other members in the group, i.e. the Joint Liability Groups which consist of 4 individuals in the loan.
Once repayment is complete, the funds are recycled for new or second time loans in the communities – a targeted and wider group of communities can be reached this way.
With a focus on local industries with appropriate technology (computers, devices, software) and training Shanti is aimed at building communities that will be self-sustaining after the initial loans have been repaid. This enables the capital to be recycled to a wider group of participants or to be recycled in greater volumes to initial borrows allowing them to expand their business further.
Other further knock on effects to the community are that children are able to stay in education longer than they would have done otherwise ensuring that further benefits are brought to the community in the longer term, health care improves, housing improves as recipients can access smart capital.
Donors, especially corporations with CSR programmes, are able to recognize a continued contribution to worthy causes each year simply by recycling the funds rather than providing.
