Check out this video to hear directly from Howard and learn more about Vittana. Photo: Vittana

Microfinance, as a poverty alleviation strategy, was popularized in the development sector thanks to the work of Muhammad Yunus. Traditional microfinance loans are distributed to small business owners and entrepreneurs with the goal of increasing the scale and profits of their businesses. What is surprising is that after more than thirty years of growth and popularity, the microfinance sector has largely neglected student loan programs.

One reason for this gap is that there has yet to be a proven track record of success for such loans. It was not until Yunus was awarded a Noble Peace Prize, and the astonishingly high repayment rates from borrowers were documented, that large scale funding institutions invested their resources toward microfinance. Vittana, a startup nonprofit were I currently intern, is working to create a track record of microfinance for student loans in developing countries by using a peer-to-peer lending platform.

Student loan programs are effectively nonexistent in countries outside of the US and Europe. Vittana helps students like Howard Rene Alvarez Morales receive the funding they need to get a higher education. Howard is a 21 year-old law and business management student at the Universidad de Ciencias Comericales in Nicaragua. He is an ambitious student who goes to school on the weekends, works as a legal assistant during the week, and takes English classes at night. In order to complete his thesis and get his degree processed, his university charged him a fee of over $1,000, a large sum of money he did not have. In an interview Howard said, “The main problem I have encountered is finding the financial means to finish my degree.” Vittana was a part of Howard’s solution.

Vittana formed a partnership with the microfinance institution (MFI) AFODENIC in Managua, Nicaragua. Our staff provided the expertise, and individual small-scale lenders provided the capital needed for AFODENIC to establish a sustainable student loan program. Howard received an student loan of $1,044 and was able to pay his school fees. The law and business management degree he is working toward is projected to increase his annual income from $2,000 to $12,000. Beyond Nicaragua, Vittana has MFI partnerships in Peru, Paraguay, Mongolia, and Vietnam and will soon be expanding to additional countries. Our long-term vision is a world where students, no matter where they live, have access to higher education.

Howard is pursing his degree because what he wants most “are the means to work and succeed, and everything begins with the first step.” When that first step is a degree, it is a giant stride toward ensuring that students and their families stay out of poverty and have more sound economic futures. Thanks to Vittana, when I imagine microfinance borrowers, I no longer only see animal farmers, salon owners, and the like. I also see students like Howard.

What can you do to help?

It is because of lenders like you and me that Vittana students have access to higher education. Visit www.vittana.org to find the student you connect with and make a loan today. Alternatively, purchase a Vittana Gift Certificate to empower someone in your life to become a lender.

We’d love to hear what you think! questions@vittana.org

What impact is the U.S. economic slowdown having on developing countries? Matt Homer of the World Politics Review writes that the weakening U.S. dollar is having an adverse effect on individuals in developing countries relying on remittances for large parts of their income. A bigger problem, however, is that the negative impact of the declining dollar is likely to go beyond the individual level. For a number of developing countries, remittances make up a significant percentage of total GDP, and several countries are already expressing concern that a decrease in remittances could hurt their entire economies.

In Tonga, for example, remittances account for just over 32 percent of the country’s total GDP. Yet because up to 80 percent of all remittances come from sources in the U.S., there is concern that continued declines in the U.S. economy “will hit Tonga extremely hard.” Economists in Nicaragua are also predicting that “any decline in the amount of remittances will undoubtedly affect consumerism within the Nicaraguan economy.” While around 40 percent of Nicaraguans receive remittances, most of which come from the U.S., economists estimate that almost 90 percent of remittance money sent to the country is spent in the local consumer economy.