Micro-finance has rural potential

Micro-finance schemes can help rural people into employment, says Jaki Bayly.

Micro-finance schemes can help disadvantaged rural people into employment, says Jaki Bayly.

EVIDENCE from a small scale research project suggests micro-finance schemes have the potential to help disadvantaged rural people into employment.

Pioneering research by Professor Muhammad Yunus in Bangladesh shows that micro-finance schemes have helped many people - mainly women - to start and build businesses. But similar schemes have not been widely adopted for use in rural England.

jakibaylyA growing interest in the plight of the “financially excluded” has seen initiatives such as the Phoenix Fund set up to provide money to support various community development finance projects in England.

But these schemes have been mainly established in urban areas, as part of regeneration programmes aimed at the demographics, geographies, and economies of relatively densely populated deprived city areas.

Prioritisation of urban problems is in many ways understandable. But approaches that are essentially urban do not work particularly well in the countryside, given the well-known differences between urban and rural areas.

The fact that the government has appointed a rural financial inclusion champion suggests that this rural difference is recognised – and that it may be possible to develop appropriate solutions to problems common to both constituencies.

Findings suggest that micro-finance schemes might well have a role to play in helping to tackle wider rural disadvantage by providing the means and support to help people into employment.

Researchers found that people least likely to be able to obtain finance to start rural businesses from everyday sources, such as bank loans, include young people and women, especially lone parents, the unemployed, ex-offenders, and the disabled.

In terms of priorities for support, interviewees from organisations providing enterprise funding for disadvantaged groups stressed the importance of viable business plans as well as “individual needs”, as their criteria for assessing suitability for help.

Clearly those least likely to be granted “normal” business finance are least likely to have the experience or skills needed to develop easily a viable business plan. Those most in need of support are, therefore, those least likely to get it.

The reasons are well-known to those involved in rural development. Potential clients are relatively few and far between, and so the cost of providing one-to-one support is relatively high (relative, it might be argued, to an urban norm).

Coupled to this are problems associated with awareness raising and an inability for service providers to become economically sustainable due to the perceived need to charge low interest rates when rural administration costs are high.

There are also difficulties with the benefit system as people move into work from unemployment. Funding criteria too is often restricted to certain geographical areas.

Yet these problems can be overcome. The research uncovered examples of good, innovative practice, and obtained suggestions from practitioners for an organisational approach designed to improve opportunities for employment in rural areas.

This approach, which recognises rural differences, is based on the need to make use of peer-to-peer and internet support, while encouraging the development of community land and reinvestment trusts.

Building working relationships with all other like-minded organisations and investing in staff and client training can also help to ensure mutual learning and rural cost-effectiveness.

This last point is particularly important at the present time, given the need to cut red tape and improve local services via, for example, the Total Place exercise.

Implicit in this is the need to evaluate costs and benefits in order to demonstrate both that investment in these approaches can produce a beneficial return for all concerned, and to help inform the long-term development of the approach.

It is suggested that initial trials of the new approach could be conducted under the umbrella of the Pathways to Work scheme, given that, in the government’s own words, help is tailored specifically for each person taking part in the programme.

Jaki Bayly is a former head of best practice and innovation at the Commission for Rural Communities. She can be contacted at jaki.bayly@googlemail.com.


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