Babacar received his loan from Issa Kouyaté, president of Maison de la Gare.
Microfinance in Senegal: Impact & Getting Involved
Born into an impoverished family in the heart of Saint-Louis, Senegal, Babacar Diop is a bright young man with an indomitable spirit.
His hopes and dreams for a better life for himself and his family carried him through his education at École Amadou Mbaye Maciré until he graduated. With a bright outlook on life and a commitment to helping his family and community, Babacar set out into the world until his destiny took a turn.
In 2014, he was injured when he was struck by a car, ultimately leading to the amputation of his left leg at his thigh. His doctor in Saint-Louis referred him to Maison de la Gare.
From the moment he arrived at the center, Babacar worked hard to recover and regain independence. He then enrolled in Maison de la Gare’s poultry apprenticeship program, and after six months, he graduated and received a microfinance loan to continue his endeavors.
He began raising chickens, which is becoming the key to his future. An ample space was set aside in the family home for his project, symbolizing the rebirth of hope and triumph over life’s most complex challenges.
Babacar standing proudly in front of his chicken coop.
Within Maison de la Gare and Friends of Senegal’s microfinance program, there are many inspiring stories like Babacar’s. Borrowers of our zero-interest loans range from young single men and women to mothers or fathers of large families to widows trying to take care of their families. Our efforts to expand microfinance in Senegal to the poorest of the poor have significantly impacted the lives of over 200 individuals and families who have successfully participated in our loan program.
Statistics About Microfinance
People are more than numbers. However, numbers can help give us better insight into how microfinance programs change lives and why they are so necessary. Let’s review a few statistics regarding microfinance programs worldwide and in Senegal.
Statistics About Microfinance and Lending Worldwide
Interesting statistics about microfinance worldwide include:
- 1.4 billion people worldwide do not have access to a bank account.
- Microloan funding makes up a global median of 39% of developing countries’ Gross National Income.
- Microfinance loans serve almost 20 million people living in poverty worldwide, and 74% of these clients are women.
- 48% to 53% of microfinance loans are first-time borrowers.
- 57% of borrowers report an overall increase in the quality of life, and 54% report a greater ability to sustain themselves through a financial emergency.
- 90% of microloan borrowers report improved financial management, and 79% report increased savings.
- 1.2 million jobs were created in 2022 as a result of microfinance programs
- 88% of borrowers report being able to make loan payments from their regular business income or wages.
- Out of 114 global microfinance institutions, 71% provided additional non-financial services at no extra charge
Statistics About Microfinance and Lending in Senegal
Statistics regarding microfinance and lending in Senegal include:
- Only 21% of the population in Senegal has a bank account.
- Bank lending in Senegal takes place against guarantees (third parties agreeing to pay the loan on another party’s behalf if the borrower defaults) rather than future cash flows; therefore, only households with significant assets can borrow.
- The interest cap on microfinance loans can be as high as 27%. Loans acquired from the Friends of Senegal/Maison de la Gare partnership are interest-free (a fixed 10% fee is charged to first-time borrowers to offset some of the cost of administering the loan. The fee on successive loans is 5%).
- As of 2023, 11 microfinance institutions are operating within Senegal.
- The average loan size is $289 or 173,400 CFA.
A Brief Overview of the Senegalese Economy
Senegal’s economy is the fourth largest in West Africa. Before the COVID-19 pandemic, it was just starting to see astounding growth. For example, between 2014 and 2018, it grew a historic 6% per year.
Despite this thriving growth record, Senegal and its people continue to struggle economically.
In 2019, Senegal’s GDP per capita in purchasing power disparity was 89% below the average for lower-middle-income African countries, ranking it seventh lowest in this group. That same year, 57.3% of the population lived below the extreme poverty line, which is equivalent to approximately 700 US dollars per year.
By 2022, the COVID-19 pandemic and Russia’s invasion of Ukraine only perpetuated this downward economic slope. In 2020, GDP saw its largest drop, shrinking by 1.3%. By 2022, Senegal’s inflation had reached an all-time high, and Senegal ranked below the sub-Saharan African average on the Human Development Index.
Senegal faces a substantial fiscal deficit due to high public spending, particularly fuel and electricity subsidies. This is further compounded by a 20% increase in public sector wages and increased external borrowing, creating a public debt crisis. With total public debt estimated at 75.2% of GDP, Senegal has now exceeded the debt sustainability threshold for emerging economies.
So, how can microfinance loans in Senegal help alleviate economic hardship for vulnerable individuals and communities?
How Microfinance Loans Can Help Senegal’s Economic Crisis
Senegal’s financial issues are structural and multi-faceted. While microfinance loans in Senegal cannot challenge root issues, they can stoke the embers of communal economies, creating jobs and trade within the community and leading to better economic stability in cities like Saint-Louis.
Without zero-interest microfinance loans, young men like Babacar would not be able to support themselves and their families.
Change starts from within, no matter how small.
Microfinance loans give individuals who would never otherwise have access to a bank account, let alone financial aid, an opportunity to kick-start their economic mobility. They’re especially impactful for some of Senegal’s most vulnerable populations.
Poumera, showing off her wares.
Pourmera’s Story
Pourmera Diop received a loan of 160,000 CFA (approximately $245 USD) to purchase women’s products to sell to her neighbors and friends. These products include lingerie, perfumes, incense, and other enticing items, such as the pearl belts shown in the picture.
She primarily sells these items in small, intimate “Tupperware”-style gatherings held in her home.
Pourmera’s signature product is a special perfume created by her mother many years ago, which is believed to have magical properties, giving her an edge over her competitors.
At 45 years old, Pourmera is a dynamic and personable woman with a great sense of humor. She has two children and supports her family through the sale of these products.
Pourmera is very grateful for the microloan from Friends of Senegal, which has allowed her to increase her inventory and boost her sales and income. She is currently repaying her second loan, which will permit her to expand her range of alluring products.
Hamidou’s Story
Hamidou was only a young boy when his parents sent him off to Saint-Louis to learn the Quran.
He lived in a daara, a religious community of children from 4 years of age to 18. Daaras are often hygienically unsafe spaces without even minimal facilities (as many as 50 children may share one toilet, which is little more than a hole in the ground). Some “spiritual leaders” of the daaras both physically and mentally abuse the children. Most require that the boys beg on the streets for money, and many are punished if they do not reach their “quota” of money raised in a day. Education is limited to learning to recite scriptures of the Quran.
Hamidou struggled with the shift in his surroundings and the mistreatment he faced in such a daara. As a child of three, he spent his childhood in rural Senegal, guiding cows and raising chickens. Now, in an urban city environment, Hamidou misses the quiet farmland he was raised in and his parents, whom he had not seen for five years.
One day, Hamidou found his way to Maison de la Gare’s center, discovering more possibilities than he could imagine: essential health and hygiene services, nourishing food, and literacy classes coupled with a sense of acceptance, community, and camaraderie. Through the microfinance program, he was offered the opportunity to become financially independent.
Reminiscing about his time back home, Hamidou took an exceptional interest in our poultry program. He is currently working hard to obtain a microfinance loan once he graduates from the business training program.
Speaking in his native Wolof, Hamidou told the program leader, “I see this opportunity as a ray of light, a chance to change the course of my life.” Hamidou is on his way!
Hamidou holding the fruit of his labor and the beginning of his shining future.
Common Industries In Which Microfinance Borrowers In Senegal May Choose To Work
Our microfinance program participants have plenty of options for choosing what kind of business they would like to establish. Like Babacar and Hamidou, they may select agriculture, or they can choose a microfinance loan to start a business in other industries, such as:
- Fishing
- Product sales in the Market or on the streets
- Construction
- Repackaging of products into affordable quantities
- Textiles and Tailoring
- Hospitality and food services
- Health and beauty services
- Artisan and craft businesses
- Furniture making and repair
- Online sales of clothes and essential household goods
- And more
Our borrowers have many opportunities to earn a sufficient living, care for themselves and their families, pursue their passions, and make a difference in their communities.
Are you interested in helping people like Babacar and Hamidou? The good news is that it does not take a lot of money to help the hard-working people of Senegal make their dreams come true.
Learn how you can donate or become a volunteer with Friends of Senegal and Maison de la Gare today.
Friends of Senegal and Maison de la Gare Need Your Help To Support Microfinance in Senegal
With your help, we can achieve our 2025 goal of granting over 120 microfinance loans to individuals in Saint-Louis and surrounding villages.
Here’s how you can assist:
- Become a volunteer: Spend two weeks to two months assisting the microfinance program (and/or one of MDG’s many other programs) while seeing firsthand the difference just one microfinance loan can make.
- To become a volunteer in the microfinance program, you must be
- At least 18 years of age
- Have some school or direct experience in business or finance
- Speak an intermediate level of French
- Be vetted and accepted into our program
- Donate: What may be a small amount of money to you could lift a family out of poverty through your investment in our microfinance program.
Interested in other volunteer opportunities with Maison de la Gare outside of microfinance? Learn more here.
Our program’s success is due to the support of our donors and volunteers like you. We hope you will join us in making the dreams of people like Hamidou and Babacar’s dreams possible.
Microfinance in Senegal is Not Created Equal: Loans With Interest vs. No Interest
The cap on interest charged for loans is 27% for MFIs and 18% for banks. These high interest rates often force Senegalese borrowers deep into debt as they struggle to pay back their loans and incurred fees.
Most banks in Senegal do not lend money based on future earnings. Loans for individuals without significant assets must go through a third-party guarantor, which may ultimately put people who cannot pay in dangerous situations if they default on their loans.
Friends of Senegal and Maison de la Gare work together to provide zero-interest microfinance loans as well as finance and business education classes to their borrowers. With over 200 loans granted through December 2024, we have seen families flourish as more individuals attain the financial power to trade, buy, and hire their peers, friends, and family.
Over 97% of loans have been repaid in full and on time.
Friends of Senegal is a non-governmental, non-religious organization whose programs are managed solely by volunteers. Our program’s success is due to the hard work of our volunteers, local committees, and participants. Learn more about donating or becoming a volunteer here.
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