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News || Thursday, 03 November 2011

CHF, Planet Finance and Souktel Help Micro-Loan Borrowers Track Loans by SMS

For many people in the US or Europe, the idea of “microfinance” has become a household term only recently—after online lender Kiva launched a service that lets the general public make loans directly to small businesses in the developing world.

However, other organizations have been doing similar work for over a decade: Since its inception in 1994, the Ryada program of US non-profit CHF International has disbursed close to 5,000 small business loans in Palestine, with a combined value of almost $15 million. One of those loans recently went to Ahmed Ammar and his wife Thuria, who wanted to expand their West Bank kindergarten program to include more teachers and students, as well as better-quality educational games and toys. They secured $2,000 in funding and, over the past three years, have fulfilled all of these goals.

However, for first-time borrowers in the Middle East or Africa–where many people don’t have commercial bank accounts—the loan repayment process can be confusing: It’s often tough for loan recipients to track how much they owe for each repayment and when it’s due. As a result, a growing number default on their payments and face high interest penalties—causing real problems for families with limited resources.

This month, CHF’s Ryada program joined forces with Souktel to address this problem—by creating a mobile service that offers regular, automatic updates with all of this information via SMS on borrowers’ cell phones. The service aims to help borrowers become more knowledgeable and confident about their financial situation, more likely to make payments on time, and better equipped to develop a solid credit history as a result. The service was developed with generous support from Paris-based microfinance network PlaNet Finance.

“Our hope is that this service will empower local business owners by giving them real-time information about their loan balances and payment due dates,” explains Souktel’s Lana Hijazi. “For small-scale entrepreneurs like Ahmad and Thuria, every penny counts. SMS updates are easy to understand, making loans easier to repay—and giving these borrowers access to more financial support, so they can grow their businesses and help their communities”. She adds: “The system is completely automated, so it updates people’s phones at a specific time and day each month, and does so immediately. This enables us to run the service at a large scale with minimal effort.”

The SMS loan information service launches this month among 6,000 borrowers, but the project partners hope to expand SMS loan updates to all of CHF/Ryada’s clients in Palestine. “This SMS service is easy to use, it’s reliable, and it helps solve a problem,” Hijazi sums up. “We believe there’s huge potential for this to grow”.

Learn more about CHF here: Learn more about PlaNet Finance here: