Near East Foundation - Community-Based Credit

Small-scale income-generating activities are an important means through which poor families capitalize on investment opportunities before them. Household-based productive enterprises diversify survival strategies. Many families, however, cannot raise the capital necessary to harness existing skills and resources. Too small and insecure to attract financial institutions, unmet capital needs of the poor often represent lost opportunities and marginalized economic participation. Poverty persists because institutions cannot respond appropriately to people's needs and prospects.

The NEF Community-Based Credit (CBC) program aims to strengthen the ability of community-based institutions to foster the potential of local constituencies. Many communities manage a variety of resources including land, water, information, and technology to meet individual and collective needs.

Community-Based Credit builds on these local management systems by combining appropriate capital inputs with local institution strengthening. The provision of "seed" funds, training, and implementation support by the Near East Foundation and its partners enables communities in its process of self-care.

This approach is one extension of NEF's work in other areas. It focuses on helping people to acquire the knowledge and skills necessary to earn a better living and lead a better life. In one context this may mean a focus on basic needs, while in another it may call for organization development to help people participate in the building of their nation. Livelihood enhancement requires both effective support strategies for people's self-help efforts and the transformation of those institutions working with such groups.

Guiding Principles

Community-Based Credit is a decentralized lending methodology that combines social targeting of needy clients with disciplined financial appraisal and services. Loan funds revolve to assist a growing client base. The approach of NEF to credit is inspired by four fundamental beliefs concerning local economic development.

Local organizations are ideally positioned to help the poor in their communities, because of their shared community life. Development programs should grow out of the awareness of local organizations concerning the needs of their communities. These efforts should be designed and owned by the community itself. Assistance to poor families should strengthen rather than replace existing strategies for self-reliance. Client families determine their own business ideas based on their existing skills and resources. Development programs should aim at self-sustainability. Client fees and in-kind community efforts can maintain programs to bring about long-term change.

This methodology is based on extensive experience by NEF with community development in Jordan, Lebanon, Egypt, and Sudan. In Jordan, where the approach was developed, national agencies representing both the government and voluntary sectors are enthusiastically initiating community-based credit funds throughout the country.

Further challenges are to incorporate saving components into the existing funding base and further mobilization of community resources for investment growth. In addition, NEF is working to establish a private sector investment company that will bring together existing funds for the purpose of capital sharing and the promotion of long-term sustainability and growth.