The following story exemplifies IFAD’s work with the rural poor:
Sanduq: A rural microfinance innovation in Syria
A local microfinance institution provides small loans for poor rural people, with particular attention to women. The success rate of the small businesses that have sprung up because of these loans has been astonishing. Abbas Abdulhamid Kharzoum, 45, a farmer and father of seven children, proudly exhibits a mattress he has made. “I made this mattress using wool from our sheep,” he says. “All our new mattresses are homemade. We could not have made them without the sheep we were able to buy using loans from our sanduq eight months ago.” The literal meaning of sanduq (pl. sanadiq) is ‘box’. These village funds, owned and managed by local members, are fast becoming the most successful autonomous microfinance institutions in Syria. In a country with a highly centralized banking system, the concept of an autonomous microfinance institution was novel. Sanadiq were first introduced by the United Nations Development Programme (UNDP) as part of the IFAD-financed Jebel al Hoss Agricultural Development Project. They proved so successful in stimulating small rural enterprises that they were replicated in IFAD’s Idleb Rural Development Project, which was launched in 2003. At the close of 2009, 22 villages in the province had sanadiq.
Kharzoum and his wife Mariam Al-Zarraq, 38, live in the village of Hezarin – 20 km south of the city of Idleb in the north-west. The couple, who have three daughters and four sons, farm a small plot of land planted with olive trees and crops. They made a meagre living until they got the chance to improve their family’s standard of living by investing in livestock-raising. With two loans of 50,000 Syrian pounds (SL) each (about US$1,136), they bought six sheep and four goats, which allowed them to expand their business into dairy and wool products. The new business provides the family with enough milk, meat and wool for their own needs and with surpluses to sell. Thanks to training by IFAD’s Idleb project, the couple have learned valuable techniques for processing dairy products, shearing and treating wool. “We no longer have to buy dairy products to feed the family,” says Mariam Al-Zarraq. “In fact, now we are selling to others in the village. I make cheese, yoghurt and concentrated yoghurt balls for long-term conservation. These are very important for the family diet, especially in winter. I’ve seen the difference these dairy products make to my children’s health.”
A novel concept
Abdoulaye Badji, 50, passes a basket containing straw for animal feed to his son Amadou as he stands on top of a thatched roof where he keeps his cattle near their house in the village of Sindian, Senegal.
The province of Idleb is largely inhabited by small farmers. Life is harsh: the rocky terrain and dry climate make farming difficult. Here, as elsewhere in rural Syria, people have limited access to sources of finance. Financial institutions are few and far between and, where they do exist, the collateral required for loans places them out of the reach of most poor households. Money lenders, with their high interest rates, are not a viable option for most poor rural people, who remain entrenched in poverty, unable to make the small but significant investments that would allow them to increase their income. Thanks to the creation of the Idleb sanduq, life has improved for many villagers. Anyone in the village is eligible to borrow, provided they join the sanduq and fill in the loan application. Loans can be taken out by individuals or groups. No collateral is required – the signature of the two local guarantors is sufficient to ensure that borrowers respect their repayment schedule. The cost of borrowing is half that of normal banks or Islamic lending institutions. Sanadiq have adopted financial practices consistent with local values. “Loans are not disbursed to the borrower directly in cash,” says Ayman Al-Abhoud, secretary and accountant of the Hezarin sanduq, and president of the village development committee. “According to the Islamic lending method, the lender pays for the goods that he borrower wishes to purchase. The borrower then begins repayment in instalments for the amount of the loan, plus an agreed profit for the lender. “Initially people were afraid to get involved,” says Al-Abhoud, “so we started an awareness raising campaign to convince them of the benefits. The sanduq was established just 15 months ago and already we have 155 shareholders and 34 borrowers. People here in Hezarin work hard to ensure that they make the best of their loans by making a profit and repaying their loans. In our village, profit rates are 12 per cent per year for annual repayments, and 9 per cent per year for monthly repayments.”Sanadiq do more than just facilitate loans. They also help communities make the best use of their limited resources, providing training so that members have the skills they need to improve their incomes and living conditions. “We offer vocational training opportunities for members in many economic activities, including agricultural production, water harvesting, food processing and marketing of products – all skills needed for building successful business enterprises,” says Al-Abhoud.
Benefits for women
Women's focus group discussion for the Rural Poverty Report, Akhoon Bandi, Pakistan.
In Hezarin, women now constitute 70 per cent of the village population and are particularly targeted as sanduq members and borrowers. Most of these women are illiterate, but with credit and new skills they are seizing opportunities to improve their lives. “In the past, local girls have had to leave the village in search of work,” says Al-Abhoud. “Now, with the availability of loans, the problem has diminished. A large number of young women are benefiting from the opportunities offered by the sanduq. In Hezarin, the majority of borrowers are women and thus they also form the majority in decision-making within the assembly of members. And the managing team of three includes a woman. Six young women borrowed as a group and opened an embroidery workshop, which now employs 60 village women.”
Success and sustainability
Each sanduq requires seed money during its first two or three years, which is paid back to the Government without interest. Once a few basic running expenses have been met, the profits are redistributed to shareholders on an annual basis. The success of the sanadiq is impressive, with loan repayment rates of 100 per cent and a zero failure rate for ongoing enterprises. They have become essential players in expanding local economies, benefiting poor local communities and families. Many new enterprises have been started in Hezarin thanks to the availability of loans. These include a dairy processing facility that makes and sells cheese and yoghurt, the embroidery laboratory, a hardware store started and run by a group, a minimarket also started and run by a group, and a motorcycle repair shop opened by a young woman and her brother. Sanduq managers hope to raise the ceiling for loans to SL 100,000 to match rising market prices. The continuing growth of Hezarin’s sanduq will ultimately allow the institution to make its lending terms more flexible by offering a wider selection of products with variable repayment schemes. This will allow it to continue to promote entrepreneurship and microenterprise. Loans permit farmers to bypass moneylenders and make more profit from their produce, and microentrepreneurs use quick-turnover repeat loans for new investments and to build their businesses rapidly. The economy as a whole benefits, as do families. “We are happy that our family now has the chance for a better future,” says Kharzoum. “Once we complete repayment of the loan, and our livestock-rearing activity continues to grow and generate income, we are confident that we will have a more comfortable lifestyle. We even hope to start saving.”
More stories from the field are available on IFAD’s website