Income Generation through Micro Enterprise Support

• The scheme must be sustainable (ie it must continue after CMP external funding ends);
• Income must be generated by some productive activity of the recipients, not consist only of the money handed out by CMP;
• The income generated must directly benefit low-income participants;
• Whatever IG scheme is chosen, it must be consistent with principles and methods of CMP (ie designed to strengthen low income communities);
• Must avoid charity (which weakens) and design a method that will strengthen;
• The training of CMP must be for strengthening and mobilizing, and be linked to action; and
• It must be chosen by the target community.

• Should the financial support be in the form of credit or grant?
• Is the generation of income (productive activity) to be by a group (such as a co-operative) or by an individual?
• Is the loaning activity to be undertaken by: (a) the ministry, (b) the project, (c) a bank, another scheme or project (eg Ntandikwa)?
• Who is to administer the scheme (training; financial support)?
• What was to be the "training as mobilization" role of CMP?
• What limits to each loan (to group, subgroup, individual)?

• Banks do not like to give out loans of small amounts, so the system should be set up so that the bank issues large amounts of money, such as 10,000,000/= (US$30,000) to 40,000,000/= ($50,000).
• Loans for productive activities should be in the range of 100,000/= ($100) to 500,000/= ($500) per individual in production;
• A pyramid, with trust groups of 5 to 7 individuals at the bottom, and of 5 to 7 groups in an umbrella group, has a function of taking large loans of the bank and breaking them for distribution as loans to smaller groups or individuals;
• Small groups of 5 to 7 of individuals at the bottom must be trust groups, formed of individuals who identified each other as individuals who could be trusted with their money;
• The traditional credit rotation system is used as a basis concept, where members regularly contribute a very small amount, but that is used as bank collateral instead of being distributed to one member;
• The group should act as a credit distribution agency, not as a productive organization (as in a co-op). The productive activity is more effective at the individual level (soap making, petty trade etc.), which gets its small amount of credit from the group. (When any productive group is larger, as in a co-op, it is harder to manage or control, so it is less likely to be able to make a profit, avoid diversion, and pay back its loan); and
• Training, mobilization, supervision and meeting by CMP District Coordinators and CDAs are all necessary, especially in challenging the participants to choose and plan activities that are viable and not unrealistic wishful thinking.

1. training in techniques of management of the production enterprises to be conducted by those we want to help;
2. training in finance, banking and credit procedures necessary for the distribution of credit to those who want to use it to invest in productive enterprises; and
3. management training in the special sense that we use it in CMP, i.e. mobilizing and organizing to develop organizational capacity (in this case to form and organize a credit organization or association).

When the money was collected, it was given to one member of the credit rotation group in turn. This person could be chosen by lot, or when there is a death of a relative, and often is used for funeral expenses. (Often the members also all attend a funeral of a relative of one of its members). When the money was distributed by lot, the recipient could use the money in some form of investment, where s/he would not save such an amount if s/he did not have the support of the group.
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1. mobilizing / organizing;
2. training; and
3. credit.

• The Income Generation (IG) element of the Community Management programme must be well planned, taking into consideration the realities and potentials of communities today.
• As in all IG schemes, it is wise to proceed cautiously, and frequently make and discuss assessments of lessons learned and proposed directions.
• We should not implement eclectic and separate income generation activities in the field. All initiatives in this sector should conform to a clearly described and consistent policy paper approved and signed by the CMP National Steering Committee.
• Initial action, especially loans, should be modest. Early disbursements of large amounts encourage high expectations and unrealistic assumptions.
• Assessment is essential, at every stage.
• Credit should be offered at market rates of interest, not subsidized rates.
• Emphasis should be on training of participants where they make assessments of their current resources and inventories, management and financial skills, and honest appraisals of potentials for success. Unrealistic optimism may be the greatest danger inviting failure.
• Training should include group formation, encouragement (re-organization for capacity building), and skill training (in production management, financial and credit management, banking skills, credit mobilization, group formation, and resource and personnel management).

Individual Target Participant:

This person is the low income target of CMP's IG mobilizing efforts. She has her awareness raised of how the scheme works. She joins a trust group. She learns savings and banking procedures from CMP training. She deposits small amounts of money on a regular basis (eg weekly) with the trust group. She keeps a pass book to record the amounts deposited. She obtains a loan of between 50,000/= and 500,000/= from the trust group. She is trained by CMP in ensuring that productive activity is viable, and planning, financing, and management skills. She engages in productive activity using that small amount of borrowed capital. She pays back the capital and interest to the trust group on a regular (eg weekly) basis, as she did the initial deposits.

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Trust Group:

This group is composed of from five to seven individuals formed on the basis of willingness to trust each other. It is mobilized and organized by CMP district coordinators (ie by social animation efforts). The group collects regular savings deposits from members, based on practice of traditional credit rotation groups, and deposits them with the umbrella group. The trust group breaks loans (that the umbrella group obtains from the bank) into amounts to loan out to each member.

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Umbrella Group:

This group is also mobilized and organized by CMP district coordinators. It is composed of from five to seven trust groups that are formed into an umbrella organisation. It collects contributions from the trust groups and joins the money together. The umbrella group deposits regular payments into the bank, obtains a large loan from the bank, and breaks it into smaller amounts for redistribution to the trust groups. The umbrella group then accepts the repayments from the trust groups, and combines them for repayment to the bank.

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Bank:

The bank receives the initial working capital from CMP, reducing its initial risk and not using its own capital. Based on a letter of understanding from the Ministry, it accepts regular savings deposits from the Umbrella group (identified to it by CMP), and opens up a savings account and a loan account for the umbrella group as a whole. The bank makes a loan to the umbrella group on recommendation from CMP, initially using the capital deposited by CMP. The bank collects repayments of the loan from the umbrella group.

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CMP (or implementing agency):

Provides initial loan capital to participating bank. Provides training in handling credit, financing and managing productive activities to participants. Prints and distributes passbooks to participants. Identifies umbrella group to bank, and indicates when the group is capable of borrowing money, and its amount.

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Ministry:

The Ministry of Gender and Community Development is the implementing agency of CMP, through Districts. The Minister, on behalf of the Ministry, signs the letter of agreement with each bank.

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District:

Local Councils (levels 1-5) and their civil servants must understand and approve the scheme for it to work).

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