A loan doesn’t always go into a business
For people living on low incomes, financial pressures rarely arrive one at a time. An unexpected expense, a poor harvest, illness or a period without work can quickly put pressure on an already stretched household budget.
The research found that while some borrowers use loans to grow businesses, others use the money to manage these everyday pressures — whether that’s covering essential household costs, supporting relatives or navigating a difficult period.
From a traditional microfinance perspective, these might be considered ‘non-productive’ uses of credit. But that misses an important point: being able to manage financial uncertainty is valuable in itself.
Annie Khosa knows this first-hand. Before joining MicroLoan Foundation, she had to sell her home to pay for food and her children’s school fees. It was a difficult decision, but their education came first.
When Annie joined MicroLoan Foundation in 2010, she used her loan to invest in farming, with a longer-term goal of buying land and building a new home. Over the years, she and her husband diversified their income through farming, poultry, a grocery stall and an ice-lolly business. Today, Annie has rebuilt her home, supported all her children through school and created a more secure future for her family.
Her story illustrates an important distinction: the value of finance isn’t always in what the money is spent on initially, but in the opportunities it can create.
Reliable access to finance can give households more options when something goes wrong. It can help them avoid selling productive assets, take advantage of opportunities when they arise, and gradually build back financial security.
