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Iran: building social capital through microfinance

Listening to the fifty or so chattering women gathered in the mosque of Khamesan, a village in north-western Iran, it is hard to miss the atmosphere of solidarity. Their sentences are filled with words such as “trust”, “sharing”, “mutul support” and “team work”.

They are all self-help group members, an oddity in a country where grassroot-level organizations are not common and microfinance did not exist until ten years ago, when it was introduced by IFAD through its local partner, TAK-International.

“When the facilitators came to promote the idea of self-help groups, some people in the village suspected that they wanted to cheat us and investigated the NGO”, recalls a member called Nazanin, 26. “Two members left because of religious problems”, recounts another woman, called Sabri, 45, referring to the fact that under Islam charging interest is forbbiden.

TAK slowly won over the initial suspicions and now has five self-help groups in this village and over 300 in the rest of country, with more than 5,000 members - mainly women - who finally have access to financial services. This achievement would not have been possible without TAK’s strong focus on capacity building within the self-help groups.

Capacity building is not limited to financial literacy but also involves strenghening social bonds within the community.

“Along with economic empowerment, this project is also bringing social change, because it encourages dialogue and decision making at grassroot level in the communities”, notes Mohammed Nafarieh, Social Affairs Deputy of the State Welfare Organization, which is helping TAK expand micro finance throughout the country.

Among the most important concepts that members learn from the projects’ facilitators is that of shared responsability, which, for example, means that when someone takes a loan the whole group is liable if he or she does not meet the repyament committments. This mechanism leads to a repayment rate of almost 100 per cent while cementing trust within the community.

Nevetheless, responsibility is not the only thing that is shared within the self-help groups.

“I joined because I needed credit, but in the group I also found a place where I can share my family and economic problems”, explains Sabri, who fixed her well with the first loan and made it deeper with the second. “We make decisions taking into account the interests of all our members, but if someone has an urgent need we try to give her priority”, she adds.  

Nazanin became a member of a group called “Autumn” five years ago. At that time she was making carpets for a company. Today, after obtaining and repaying nine loans, two of which were from the Agricultural Bank, she has 17 employees working for her own carpet company. “Loans from the bank are bigger”, she says. “But when I take them from the self-help group I am happier because I know that I am helping the other members as the interest I pay will go to them”.

Beyond the material advantages of Nazanin’s carpet factory or Sabri’s well, Ifad’s project has also created less visible results such as women’s empowerment and an increase in social capital. Thanks to the values of solidarity and responsibility upon which every self-help group is built, Ifad is not simply providing access to financial services for rural Iranians, but also making Iran’s civil society stronger.



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