Tell us about the social impact of your innovation. Please include both numbers and stories as evidence of this impact
The Sustainable Financial Education Program increases artisans’ financial knowledge and access to capital through short term loans and long term savings. Each component uniquely impacts artisans’ small businesses.
Financial literacy trainings are the backbone of this program. Through trainings artisans learn to separate personal and business expenses, to calculate production costs and to better manage finances. To date, 80% of artisan groups have participated in financial education trainings.
The loan program provides loans at 0 % interest with repayment schedules which allows artisans to determine the rate and schedule of their repayments. So far, ten artisans have participated in Esperanza en Accion’s small loan program, with 100 % repayment. We have lent a total of $1,750 and hope to increase this number in the future. This program has given artisans such as Guadalupe Nororis and Francis Cano improved access to technology which has helped them to strengthen their small businesses. Both of these women entrepreneurs built kilns on their properties to fire their ceramic pieces and mitigate the risk that was involved in renting kilns from others. Other artisans used loans to purchase raw materials, to participate in fairs and to make improvements to their workshops.
The Savings Program is the final piece of our Sustainable Financial Education Program. In addition to loans for the short term, it is essential to also build knowledge of how to create savings for long term sustainability. Twelve of twenty-five artisan groups have developed savings plans to address a variety of needs in their small businesses. These range from purchasing machinery and raw material to improving their workshops and creating medical funds for their group. In the process artisans work to meet their needs by creating savings and further increasing their independence as small business owners.
Overall this program is a financial revolution for small business owners who previously lacked access to capital as well as the knowledge of how to better manage their existing funds to promote sustainability in their businesses. The Sustainable Financial Education Program enables low income artisans in Nicaragua to be the principal actors in their own development.
Problem: Describe the primary problem(s) that your innovation is addressing
Esperanza en Accion’s Sustainable Financial Education helps combat some of the most critical problems that impoverished artisans in Nicaragua face.
While artisans have an amazing ability to make beautiful works of art through skills that have been passed down through generations, they often lack financial literacy due to severe poverty, low education levels and rural living. This reality is even more severe for women artisans, whose access to education and critical role in household management compound their lack of access to basic financial education. These challenges translate to difficulty in determining product pricing, establishing long term financial stability and day to day financial management of their small businesses.
An even larger problem is artisans’ ability to access credit as lenders often seek to take advantage of poor borrowers by imposing interest rates that range from 25-70% annually. This creates a barrier for artisans as they are unable to access the credit necessary to invest in technology that will improve their small businesses.
Similarly, for many living in poverty in Nicaragua, savings is not practical, in part due to lack of capital to create a savings as well as a lack of a savings plan. Lack of savings prevents artisans from being sustainable and reduces their ability to withstand the risks involved in owning a small business.
Together these problems create a significant barrier in the creation successful sustainable businesses which artisans can rely on to support themselves and their families.
Actions: Describe the steps that you are taking to make your innovation a success. What might prevent that success?
In financial education, most of the artisans we work with are women who live in rural areas with low education levels. One risk is that financial education theory will not be put into practice. In order to prevent this, we are performing site visits to artisans and helping them integrate topics covered by the trainings into their small businesses.
The loan program presents the risk that artisans will not pay back the money that they borrow, in turn jeopardizing future loans to other artisans. This has not yet been a problem, due to Esperanza en Accion’s eight year relationship working with and helping artisans find solutions to specific problems that they face. We continue to build relationships through visits and phone communication, along with a history of services that artisans have received from Esperanza en Accion. Additionally, the loan program is designed to involve artisans in the process, asking them to determine their own repayment terms, improving the potential for loan repayment.
Finally, the savings program runs the risk that artisans will not meet their savings goals, due to lack of funds or lack of discipline in saving. The savings program was created so that artisans could develop realistic goals that they can meet, improving the probability that they will be able to do so. In addition we are offering to match artisans’ goals up to $150 per group if they meet their goal, providing further incentive to meet the goal they have established.
Results: Describe the expected results of these actions over the next three years. Please address each year separately, if possible
Year 1, 2010:
In 2010 we expect to see improved results in artisans’ businesses due to their improved access to financial education. At least 10 artisan groups will know how to calculate a fair wage for their products and they will begin to separate personal and business expenses. We also expect to see improved access to technology due to the loan program where artisans can better equip their small businesses due to increased access to credit for at least 7 groups. Currently we have 12 savings plans and expect to see at least 8 more groups develop those plans where they will save for the goal of their choice in their small business.
Year 2, 2011:
In 2011 artisans will have greatly improved their small businesses and their ability to produce artwork, in turn they will be better able to meet the demand of their clients. Many will have improved access to technology due to the investments made through their loans and their savings. We will continue to encourage artisans to develop savings plans and hope to have 100% participation in developing second year savings plans. We will continue to invest in trainings for improved financial management and will make more loans based on the need of the artisans.
Year 3, 2012:
By year three, we are expecting all groups to have created savings, even if they have not met their goals. Depending on the success of their group savings programs, the loan program will not be as necessary, or perhaps for larger investments. Our financial education program will transform to address changing needs of the artisans groups. At this point, we may evaluate the possibility of including new artisan groups in the Sustainable Financial Education Program.
If your innovation seeks to impact public policy, how?
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