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Rural micro finance: REBA case study brief number 20
Wahenga
November 2007

http://www.wahenga.net/index.php/views/in_focus_full/regional_evidence_building_agenda_reba_thematic_briefs

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Overview

It is arguable whether microfinance can be regarded as social protection. For one thing, the use of external funds for microfinance is typically restricted to start-up activities, with self-financing being the long run intention. For another, savings and loans are to do with financial markets and small business development, and are therefore aimed at stimulating economic opportunities rather than securing minimum acceptable levels of consumption through social transfers. Of course these are matters of interpretation and degree, but some contemporary uses of the term social protection seem to expand its remit to cover almost all development policy, and this is not necessarily helpful for advancing the case for improved social protection coverage for the vulnerable in southern African countries in the future.

Nevertheless, this review of a rural microfinance scheme in Zimbabwe is included as the final case study in this social transfer series. Readers can make up their own minds whether microfinance constitutes a social transfer. The scheme under consideration is called the Kupfuma Ishungu Rural Micro-Finance Programme (KIRMFP). The goal of this scheme is stated as the 'sustainable protection and promotion of the livelihood security of rural economically active households'.

The scheme is managed by the international NGO CARE through local partners. It began in 1998, with funding from Austrian aid, and has expanded substantially since then, with funding in different phases also from the DFID Protracted Relief Programme (PRP), and the Swedish International Development Agency (SIDA). KI-RMFP currently works in 20 districts across 5 of Zimbabwe's provinces. At the most recent count in October 2006, its total outreach comprised 7,600 savings and loans groups with 72,000 members, of which 87 per cent were women. Cumulative savings across groups in mid-2005 amounted to Z$4.2 billion, and cumulative total small loans made across all groups had reached over 1.1 million at that time.

Difficulties for participants in the scheme are created by the accelerating hyperinflation of recent years, due to the speed at which the real purchasing power of money savings declines. This means that cash savings must be turned into tangible assets almost instantly in order to minimize erosion in their value.

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