Purple Shoots creates long term, sustainable change for the people we support. Our loans enable our borrowers to create businesses which provide a pathway for them out of debt and the benefits system and the hopelessness of unemployment. The economic and social impacts are huge both for them and for their wider communities. Money given to us can go round and round several times and all our borrowers will say that our belief in them and our small loan transformed their lives.
But fundraising is still a challenge for us – and there are some objections which come up frequently so I thought I would tackle them head on in a series of short blogs. The third one is around the whole concept of microfinance.
“Microfinance doesn’t work” “You’re creating indebtedness”
I’m answering these two objections together because they are linked. Microfinance done badly does create indebtedness – done well, it can be the key that releases people from indebtedness.
The chances are that the people we lend to will have other borrowing – to survive on benefits is extremely difficult and any sort of crisis (a broken washing machine, the need to pay for a funeral, travel costs for hospital visits) will mean a need to borrow. A loan to start a business is adding to that debt burden – which is why our system includes a very careful investigation of each borrower’s circumstances and a judgement as to whether the business will deliver the income that the borrower believes it will and if that income is enough to cover living costs as well as business costs, given the speed with which benefits drop away as soon as anyone moves into self-employment. If it does, it provides the pathway for people out of indebtedness – and we have numerous borrowers who will confirm that this is the case.
Our benefits system does conspire against our borrowers. The fact that they aren’t allowed or able to save any money beyond a certain very low level means they start a business with no cushion of funds for contingencies or problems, and the staggeringly fast taper away of benefits (63p of benefits lost for every £1 earned) means the new business is under pressure very quickly to deliver an income for the borrower to support his living costs. Those two factors together serve to perpetuate poverty for some time once a new business starts and places the new business in jeopardy in its early stages. This could all be resolved and the business owner’s chances of success and financial situation will be greatly improved if the DWP modified the Universal Credit system. It requires resilience to power through this at present – something which our borrowers demonstrate in bucketloads.
Microfinance for people at the bottom of our economic pile DOES work – for them it puts them on a pathway away from dependence on benefits and constant shortage of money, and into something which makes the best of their skills and builds confidence and self-esteem. For their communities it builds increasing local prosperity – money spent, people employed, buildings used, local suppliers etc. It’s even helping create a greener economy – local businesses on the whole use local resources. For the wider economy, it puts money into Government through taxes and saves money on benefits – as well as enabling the “levelling up” which we all now know is imperative. We are all poorer if we allow talented people to be left at the bottom of the pile.
SO PURPLE SHOOTS IS WORTH SUPPORTING! Donations, large and small, help us keep going and growing what we do, creating sustainable change for people overlooked and undervalued by everyone else.