In the past, when a family’s expenses were strained by medical bills, tuition fees, or any other sudden costs that could not be met by available financial resources, the men and women living in the villages we serve could borrow money from two sources: banks or informal lenders. Banks offered competitive interest rates and were subject to government oversight, but their bureaucratic nature and physical remoteness from the villages made them difficult to access. Furthermore, loan officers were unlikely to approve new lines of credit to individuals who had a family member that had previously defaulted on a loan.

Informal lenders were much closer at hand, often operating in the very villages where prospective borrowers lived. They were also quicker to extend loans, as long as some suitable form of collateral were offered in exchange, such as livestock or the deed to the family plot of land. However, these loans carried steep interest rates of five to ten percent per month, greatly increasing the prospect that borrowers would fail to clear the debt and thus suffer the ruinous loss of their collateral. In practice, the consequences of defaulting more severe: borrowers were given the “opportunity” to repay the lenders as bonded laborers. Borrowers, their spouses and even their children would be required to carry out demanding farm work and domestic chores as and when it was deemed necessary by the lender, for as long as the lender demanded such service.

In front of this backdrop, the IHDUA team worked with village women to create an equitable path to financial independence for rural families through a process that provides financial literacy training, access to capital and confidence-building practical experience for thousands of rural women.