Ben Wickins gets to grips with environmental microfinance

As the popularity of eco fashion continues to grow, with online retailers selling hemp socks and organic cotton teatowels springing up on the internet on an hourly basis, it may be surprising to learn that the West is actually years behind the developing world in this! Where new clothes, shoes or bags are prohibitively expensive, recycling waste is the only means most people have to acquire the goods they need. Here at home it might be fashionable to buy T-shirts made from recycled plastic bottles from retailers such as Waste Products, but it is a matter of survival to many elsewhere.

Small local businesses in the developing world also play their part. They harness the endless stream of plastic bottles, rice sacks, tyres and scrap metal to sell improved tools and consumer goods to their community and relieve some of the strain on their environment. But despite fulfilling such an important ecological and financial service, these businesses often struggle to accumulate the capitol to start off. This is where microfinance helps.

Take for example, Oikocredit, a microfinance organisation, which works by giving out small loans of as little as £20 to help small businesses in the developing world get off the ground. These funds originally come from investors in Europe, from people wanting to invest in an ideologically and environmentally sensitive business. Because of the organisation of the local lending groups, repayment rates are around 95% ¬– much higher than commercial loans, making investment in a microfinance organisation a very sound proposition.

So how does this benefit the environment? Let’s take the example of Lesing Abatayo, an entrepreneur from Jaclupan in the Philippines. After her husband left her, she began to collect plastic and sardine tins to recycle in return for a wage barely sufficient to subsist on. Then, in August of 2002, she took out a microfinance loan of $60 to purchase 1,200 used cement bags destined to be dumped on the local ecosystem. She and her daughter turned these sacks into shopping bags to sell at the market. This venture was so successful that after only three months she had to take on additional staff to meet the demand of more than 3,600 bags per week. Over the next 18 months her income increased by 700% and the bags that would otherwise have posed a threat to the stability of the local environment now carry fruit and vegetables from the market. This produce would otherwise have been held in a plastic bag, a depressingly common sight in South East Asia not only in the market place but in rivers and streams and the branches of trees where they pose a threat to wildlife. The economic and ecological success of Lesing Abatayo is down to investors in the Western world and microfinance organisations.

While the ecological success of microfinance ventures may be a by-product of the main goal of getting families out of poverty, the education of children is often the most pressing concern of borrowers. Environmental education is growing in developing nations like Thailand and Cambodia where the majority of people still live in rural areas and work the land for a living. Through investments by microfinance organisations, families are able to start businesses in order to pay for their children’s education. Instead of relying on expensive fertilisers, children are now taught that the best way to improve the soil is with animal manure, which can be sourced locally. This cheap and readily available resource is much less damaging to the ecosystem as nitrates are less likely to leach into the river system and cause the growth of toxic algae. In this way again, microfinance is helping the environment as it helps poor families.

So what can you do? An investment in organisations such as Oikocredit, AfriCap and SKS goes entirely to helping some of the world’s poorest people and for whom microfinance is the only chance of escaping poverty. An investment of £500 over five years will get five families out of poverty. This is an astonishing statistic, especially given that the only thing it will cost the investor is the difference in interest paid by a commercial bank and the interest paid by the microfinance organisation (around 5% with Oikocredit. This is how microfinance is fundamentally different to charity and represents the only sustainable way to reduce poverty. And it is self-perpetuating, as the money you invest is just the start. It continues to be loaned out and repaid with interest that can in turn help yet more families.