Taking a ‘test and iterate’ approach to impactful lending for young women in Africa

Highlighting a creative, bottoms-up approach to solving lending challenges

CAMFED Tanzania staff and client participants at the Design Thinking Workshop in December 2018

Young women in five countries across Africa are starting businesses thanks to 0% interest micro loans available through an innovative program run by the education-focused nonprofit the Campaign for Female Education (CAMFED) in partnership with Kiva.

While many of these inspiring female entrepreneurs, who are part of CAMFED’s alumnae network, CAMA, repay their loans on time, some, especially those in highly impoverished communities, find it very challenging.

When building an innovative, social-impact focused lending program, a wealth of information can come from what works for clients, but also from what doesn’t work.

As part of Kiva and Mastercard Foundation’s partnership, CAMFED was able to explore innovative approaches to improving repayment rates by holding training workshops with borrowers and staff, focusing on using principles of design thinking to arrive at contextually specific solutions

In the short term, 10 pilot approaches will be tested in varying districts, and learnings will be codified and shared, both within CAMFED and externally. Even failed pilots will be informative — as CAMFED moves to refine its partnership with Kiva and the relationship between borrowers and lenders.

Participants from the Machinga district, Malawi discussing their solutions

The end goal is to ultimately improve repayment rates across all CAMFED’s portfolio of CAMA borrowers, enabling our continued scaling of the program and partnership.

CAMFED’s approach

CAMFED was founded in 1993 in rural Zimbabwe to enable young girls from marginalized families to attend school by providing them with school fees and support services. Today the organization operates in five countries across Sub Saharan Africa: Zambia, Ghana, Malawi, and Tanzania, in addition to Zimbabwe and has reached more than 3.3 million children.

In 1998, the alumnae network, CAMA, was established to connect young women who had been supported by CAMFED to complete secondary school. CAMA is a network of support for current and future CAMFED beneficiaries. In addition to peer support, CAMA members can access training, technology, business loans, and mentoring support as they leave secondary school, when they are at high risk to marry young or leave their rural communities for jobs in towns and cities.

How the unique lending model works

Part of CAMA members’ development as cornerstones within their communities is their creation and operation of small businesses. CAMFED partners with Kiva to offer CAMA members 0% interest loans to establish and grow these enterprises; women who receive Kiva CAMFED loans receive both capital and business training to help them do so. In exchange, borrowers repay lenders using profits from their businesses.

Through a special innovation, and rather than paying monetary interest, CAMA members pay their loan forward with “social interest” — by making significant volunteer commitments to serve others, such as providing mentorship and life skills sessions to children in local high schools.

The CAMA lending program successfully empowers young women to break the cycle of poverty in their communities, and makes women in CAMFED’s broader network of beneficiaries more self-reliant and successful.

The 0% interest microloans from Kiva are a large part of CAMA’s sustainability, as they enable CAMFED to recognize and reward participation in vital community work.

Improving repayment rates

While most CAMA members pay back their Kiva loan on time, some, especially those operating business in highly impoverished, remote rural communities struggle.

This raises the question of how innovations can be tested to improve CAMA members’ repayment rates while maintaining the core characteristics of the program, to support and invest in the success of young women.

CAMFED set out to answer this question. The organization was awarded a Kiva Labs Innovation Conference (KLIC) Design Thinking Prize, which was supported through Kiva’s partnership with the Mastercard Foundation. CAMFED used the prize to hold training workshops for CAMA members and CAMFED staff on how to use the principles of design thinking to come up with contextually specific solutions to reduce delinquency. CAMFED chose to hold the workshops in Tanzania, a country that has had an active partnership with Kiva for five years, and in Malawi, a country that has recently implemented its Kiva program.

CAMFED Malawi workshop participants in the midst of warm-up exercises

The goal of the workshops, which were facilitated by YLabs, was to develop solutions to problems CAMA members have making repayments on their Kiva loans. These solutions, five for each country, were then to be piloted in different communities of CAMA members and evaluated for their efficacy in driving up repayment rates. CAMA members, together with CAMFED stakeholders and staff with varying responsibilities and roles in the loan management process were invited to take part in the workshops in an effort to ensure a wide range of experiences were included in pilot design and implementation.

Innovation programs, like those enabled by the KLIC Design Thinking Prize, are critical for development organizations, especially those in the microfinance sector. Microcredit organizations often rely on levers of social pressure and community hierarchies to encourage repayment when rates decline, and this encouragement has the capacity to slip into coercion. Finding solutions that positively incentivize repayment while retaining high rates can be a key to sustainability.

Moving the pilots forward

All in all, pilot programs will be implemented in 5 districts in Tanzania and 4 districts in Malawi. Pilots will test the various bottoms-up solutions, ranging from training on budgeting and loan use, to using local communities to underwrite loans, and better structuring additional mentorships.

All of the solutions developed by CAMFED during the YLabs workshop were feasible, desirable to CAMA members, viable, and adhered to CAMA’s culture of support and success — that all CAMA members feel included and supported, even when they fail.

Because all CAMA members are women, solutions also accounted for family duties and responsibilities.

“How might we create new ways to teach business skills to CAMA members?” whiteboard from workshop

The solution developed in Tanzania’s Kiloso District, for instance, had new CAMA borrowers receiving financial training to better evaluate the short- and long-term value of purchases for their businesses, with the hope of improving profitability and repayment ability.

In Malawi’s Mzimba North District and Mchinji District, on the other hand, new CAMA borrowers will be supported by successful CAMA members, who will be trained in mentorship concepts.

The goal of all 10 pilots developed as a result of the Design Thinking Prize is to codify and share learnings, both within CAMFED and externally. The knock-on effect is to ultimately improve repayment rates across all CAMFED’s portfolio of CAMA borrowers. Even failed pilots will be informative — as CAMFED moves to refine its partnership with Kiva and the relationship between borrowers and lenders.