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BRUSSELS, Apr 23 2007 (IPS) - With two-thirds of the world’s HIV/AIDS victims living in sub-Saharan Africa, sickness and death is too often a part of doing business in the region. But now microfinance institutions have found ways to reduce financial risk while attacking new infections.
Microfinance institutions (MFIs) have grown through the region as a way to boost economic development on a local scale. Micro-loans, oftentimes as small as 15 dollars to help someone start a small business, traditionally have nearly 100 percent repayment rates, but HIV has hit the cycle very hard.
In areas where HIV/AIDS infection rates are high, repayment can range from 65.25 percent to 86.27 percent as compared to 98 percent with non-infected borrowers, says Francesco Strobbe of the Economic Statistics Department of the European Central Bank.
Sub-Saharan Africa, according to UNAIDS in 2006, was home to 13.2 million HIV-infected people. It is then no wonder why MFIs in the past have been hesitant to invest in HIV/ AIDS-infected communities.
“The productivity of mines, factories, and farms, as well as of small, medium and micro enterprises (SMME) is diminished by the loss of skilled labour due to premature deaths, and also by the loss of working time due to illness,” says Strobbe, who has been studying the economic implications of the HIV/AIDS epidemic in Zambia and Southern Africa.
With this in mind, MFIs have begun implementing HIV/AIDS sensitising and education programmes aimed at helping borrowers to understand the disease, reduce transmission rates, and cope with overwhelming costs by providing health and funeral insurance.
Debrework Zewdie, Director of the Global HIV/AIDS Programme for the World Bank, calls this approach “the missing link in the fight against AIDS.”
“Microfinance can be a powerful tool for addressing the consequences of the HIV/AIDS pandemic in the short term and for removing the causes of the disease in the medium to long term,” said Strobbe.
Some MFIs, like Paris-based PlaNet Finance, believe that with professional management of funds and implementation of HIV/AIDS education and programmes, repayment rates of HIV-infected borrowers can get closer to those of non-infected borrowers.
Didier Krumm, training director for PlaNet Finance Morocco, told IPS that microfinance programmes can become effective vehicles for social development. He says joining financial services with health education can increase the wellbeing of clients and their families, improve their productivity, and reduce micro credit programme abandonment rates in a sustainable way.
The UNDP, in coordination with PlaNet Finance, in January launched an eight-month pilot project in Burkina Faso improving NGO access to microfinance projects that directly support HIV/AIDS victims and their families.
In the short term, PlaNet Finance’s objective is to show that professionally managed funds for people living with HIV/AIDS, which take into account their special needs and risks as a borrower, cannot only be a success but will convince other lending institutions to follow their lead.
PlaNet Finance is also organising a programme in Morocco set to launch this June, which will help over 10,000 microfinance beneficiaries through an HIV/AIDS prevention campaign targeted towards poor illiterate women.
Krumm adds that MFIs are an excellent information channel for women who are microcredit beneficiaries, and their involvement represents an opportunity to implement long term and focused HIV/AIDS prevention actions.
Opportunity International (OI), an international micro-enterprise development non-profit organisation present in over 25 countries, has followed suit with its new ‘Lending Hope to Africa’ programme. The 25 million dollar initiative aims to fight poverty and AIDS in Africa simultaneously through micro-enterprise development.
The programme not only provides microfinance loans but other services such as HIV/AIDS training, life insurance, funeral insurance and a youth apprenticeship programme.
OI’s microfinance loans are made through trust banks, groups of 15 to 40 people, predominantly women, who guarantee each other’s loans, and whose repayment rates exceed 98 percent.
Taking this new trend one step further, the Finance Trust for the Self-Employed (FITSE), a subsidiary of World Vision International in Malawi, has launched a ‘Credit with Education’ programme that includes a 12-session curriculum to educate women on prevention and care for HIV/AIDS and how to mobilise community action.
This new project is significant not only because it incorporates HIV/AIDS education but because it also empowers women. According to UNAIDS, women are biologically two to six times more likely to become infected with HIV/AIDS. The UN agency says 76 percent of all women living with HIV live in sub-Saharan Africa.
FITSE finds that “credit with HIV/AIDS education has proven to be a powerful microcredit tool that generates sustainable improvements in household living standards and in strengthening the capacity of individuals and households to respond to the impact of HIV/ AIDS.”
By incorporating HIV/AIDS support and education into microfinance programmes, MFIs worldwide are not only addressing head-on the overwhelming financial and social challenges associated with the epidemic, but now have a financially viable way to address its toll on microfinance projects and poverty reduction strategies.
“The economic and social costs of HIV are truly colossal. The epidemic, if unchecked, could transform the developmental performance of many countries,” says UNDP.
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