Soft Loans and Softer Cushions

Manel Silva manages an NGO called NETMIN (NETwork of Micro-credit INitiatives), where she makes serviettes, cushions and a variety of intricately embroidered table- and bed linen. Through its activities, NETMIN benefits the members of 78 families in North Thalpitiya.

Having worked with the Rural Development Agency even before the tsunami, Manel was no stranger to social service. Her 25-year experience included a stint during which she administered the Janasavia Fund (now called the ‘National Trust Fund’). “Post-tsunami, lots of agencies were giving loans for livelihood,” Manel recollects, “People took those loans but did not use them productively.”

Determined to buck that trend, Manel submitted an ambitious Rs 2.2-million (US$ 21,550) project proposal for livelihood. A scaled-down version of the proposal was finally approved and Manel was granted Rs 400,000 (US$ 3,920). She quickly set about mobilising interested families into nine groups and used the money to start a revolving fund.

Today, Manel has given loans in excess of the amount granted to her, raising the difference from her own resources and other agencies. An interest rate of 11.5% per annum is levied on borrowings, on reducing balance basis. This is a nominal charge - even less than commercial banks’ prime lending rate - ostensibly to teach beneficiaries the time value of money. The reducing balance method reinforces that message by ensuring that borrowers get a ‘rebate’ when they pay early.

At NETMIN’s premises, Manel runs a tapestry and embroidery venture where she supervises the embroidery of pretty cushions and colourful serviettes. These find their way into homes of the rich and famous, through upmarket retail stores and fashion boutiques. A less high-profile activity involves attaching sequins to T-shirts, thereby enhancing their aesthetic appeal and resale value.

Not only has Manel provided loans to 27 recipients, she has also given them the opportunity to work with NETMIN and avail of her entrepreneurial skills. She now employs ninety people, but does not believe in retaining her employees permanently. “I derive greater satisfaction by empowering communities and individuals – and then letting them go,” she says.

Indrani Fernando, who works with NETMIN, also operates a CBO; she talks with obvious pride about an order for linen bags that has secured recently. Besides, Indrani took a two-year loan of Rs 20,000 (US$ 196) from the CBO in December 2005. She lends this amount to acquaintances for tenures ranging from one month to five months at an interest of 5% per month, profiting from the interest spread. Six persons have co-guaranteed the loan she has availed.

NETMIN has also given loans to individuals who wanted to start small businesses. Dhammika Pereira, whose husband is a driver, runs a rice mill and a grocery store. She has availed of a loan of Rs 15,000 (US$ 147) to acquire an electrically operated machine. Dhammika’s family is co-operative, pitching in in whatever way they can: Her mother tends the store whenever Dhammika goes to grind rice flour. Her sister has provided garden space where Dhammika plants vegetables that are sold from the store.