AIM

The aim of this programme is to give the poorest families an opportunity to escape from the cycle of poverty. Our research shows that the one thing that keeps these families poor is lack of capital. Our credit scheme aims to break this cycle.

In October 2002 the programme began a new project with The Dariu Foundation of Switzerland. This project is based in Tan Phu and Dinh Quan districts, Dong Nai province, 130 km (3 hours by car) north of Ho Chi Minh City. The programme operates in the nine poorest communes.

The programme follows the principles of microfinance as pioneered by the Grameen Bank (the Bank for the Poor) in Bangladesh. Since its beginning, the Dariu Tan Phu project has pioneered a new three-pronged model: school building, scholarships and microfinance all overlapping in one geographical area.

THE PROBLEM

People subsisting in the poorest conditions make just enough to live on. They cannot defer expenditure or accumulate capital to invest: they live almost literally from hand to mouth having to buy rice every day, sometimes twice a day so little money do they have. If illness or misfortune strike they are at the mercy of events as they have no wealth to fall back on. A lack of capital means no land, no tools and no investment. The families are usually able-bodied and willing to work but there is little for them to do. Much of what they do amounts to little more than scavenging: scouring the river banks for crabs or collecting firewood in the forest.

Changing Attitudes to Change Lives
We try to demonstrate to our members:

• that they are capable of improving their lives
• that they are able to save a small sum of money each week
• that they cannot only clothe and feed their children but also educate them
• that they can and should look beyond the next bowl of rice and plan ahead

METHODS

Our members are all women. Members are arranged into groups of five. Groups meet each week to pay their savings and loan repayments. The loans revolve: when one member has repaid her loan another can receive hers. There is always at least one member without a loan. As we do not ask for collateral we use peer group pressure to ensure repayment of loans: if one member defaults the group is responsible for the debt.

USE OF LOANS

Loans are small starting at US$38 rising to US$313. The amount is carefully pitched: it is small and therefore only of interest to the poor and not too big to cause problems of repayment. But it is big enough to be useful: with a loan members can buy a small boat, a fishing net, ducks or pigs. Please see graph for details.

PROJECT SUSTAINABILITY

Members pay 1.25% interest per month on their loans. Rates are high to cover the salaries of the loan officers who administer the scheme. The only alternative source of credit is from the village loan sharks who charge interest of 10-30% per month.

Benefits
Members who have been in the programme for two or more years have grown in confidence as their income has become higher and more dependable. This confidence manifests itself in personal appearance, investment in the home and business and higher spending on food. Importantly, members also develop higher aspirations for their children particularly in educational attainment.

For more information on the Dariu Foundation and its work:

In 2004 three consultants from The Wharton Business School conducted a review of the microfinance project. Please click here to download the Wharton Dariu Microfinance Review