Household incomes of around 50 cents per day, coupled with time-consuming and physically demanding farm labor, give many families in Gorkha no chance to break from the cycle of subsistence farming. Not only are they struggling to put food on the table year in, year out; they also have no means of overcoming the situation to create a better future for themselves and their children.

The loans allow women to form small businesses or increase their smallholdings (with the purchase of animals or seeds, or even fabric for handicrafts etc.), to generate income, provide food for their children and send them to school. We also deliver crucial training in literacy and successful business practices to ensure that these women can grow in awareness and competence in the marketplace.

Newfound self-sufficiency allows them to carve out a better life for themselves and for their children, and these micro-improvements seen at the family level eventually have a positive effect on the macro-communities of the district as a whole.

The microcredit program was initiated with the Gift of Goats project in 2005, where the foundation worked with village chairmen to identify the poorest of the poor villagers to be recipients of two goats. The first village was Boharagaun in Lig Lig. Since then we have expanded the program to three more villages in Lig Lig and four others in Rautepani, Bandanda, Deurali, Malatigaira.

Following the success of the Gift of Goats project, Gorkha Foundation implemented microcredit as a way of supporting more families and nurturing more sustainable growth and independence among these communities. We started the program in the same Boharagaun village and expanded to villages all over western Gorkha.

How microcredit works

Microcredit helps poor people overcome poverty. It’s a small loan – often less than $150 per person – to those too poor to qualify for bank financing. Unlike a handout, microcredit helps people become self-sufficient to generate their own income.

A loan goes to a group of co-signers, typically a ‘village mother’s group’ (The foundation requires that our borrowers be mothers or caregivers of small children – at least one child must be age 10 or under), with the village chairman or the school principal becoming a trustee of the group.

Although each woman forms her own business, they repay loans as a group, at meetings held approximately every two weeks. During the loan term, the women receive services including literacy training, small business counseling and other support to ensure their success.

The loan term is typically short: a year with Gorkha Foundation and typically with other microcredit organizations; and the interest rate is 3.5 % rather than those higher rates demanded by unscrupulous personal moneylenders, who can charge as much as 30%.

After paying off their initial loans, the groups often pool savings, making loans themselves to members who expand their businesses or buy a home. Gorkha Foundation then ‘recycles’ repayments, including interest, to form new groups of borrowers.

Microcredit enjoys a huge ripple effect. Not only do the loans break the cycle of poverty in households and villages, but according to the World Bank and other sources, the investments that women micro-entrepreneurs make for their families later spark sweeping changes in the community. This includes bigger incomes — 50% higher than in other villages — and improvements to literacy rates, nutritional health, school enrollment and contraceptive use, to name but a few.