Born out of the Thailand Island Foundation, IT entrepreneur Johan Staël von Holstein’s initiative to help out local victims from the tsunami on Phi Phi Island, the Swedish Microcredit Foundation (SMF) emerged to continue the task for long-term assistance. Also, the Surin Relief Fund on Phuket, being run by Swedish hotel investor Richard Öhman, has given its support to it.
This foundation was also installed to help people in other places in the future who have suffered from various kinds of disasters such as flooding, earthquakes, hurricanes or in special cases repercussions from draught and war. A few places in Africa are under consideration as the foundation is approaching mission accomplished on Phi Phi.
From its inception SMF is not a tsunami aid project, but intended to use its funds to enhance lives by providing for businesses in need. It financially supports and empowers independent and family businesses, as well as brings opportunity and hope to communities through micro credits.
Back in 2005, after responding to immediate needs Johan and his wife Jessica saw the need for other long-lasting assistance to those persons who lost their source of income.
Meanwhile, Malin Speace, the foundation’s founder and General Director, who new Jessica, approached them with an idea regarding micro loans she had been pondering since 1998. Malin has several years experience from leading social sustainable projects.
“I had pondered to work out a well-functioning model to meet catastrophes and the apathy afterwards. Many times people are moved or end up in refugee camps as a result, without possibilities to start again and becoming dependent on aid. There is a need for some assistance to be able to break that cycle.”
“It told Jessica and Johan, who favours entrepreneurship, that micro credits could be something which could work long-term in building up the island and the area on its own terms and will-power, but with a little bit of assistance.”
They liked the idea and the model, which is inspired by the history behind micro credits invented during a severe famine in Bangladesh in the mid 70’s, as a way to do something concrete for the people suffering from poverty.
“You can rebuild a society quite fast with micro credits as a complement to the ordinary assistance and relief activities,” she says during one of her visits to Phi Phi, in March 2007.
After starting doing interviews in early 2005 among candidates they chose some to start with.
“The micro credit principle is to start with a small group and get them going and then take the next selected group etc. You get cycles of credit loan takers. The social group is what makes it succeed; when it works for somebody and they start paying back another person can borrow the same money again. Then it continues and the same money is recycled,” explains Malin.
Distribution of the first loans started in February 2005 and has continued since then.
“We extended to four generation loans after a recent fire when half a block burned down where we have some borrowers.”
So far 230 families have received assistance by interest-free loans ranging from 10 000 to 100 000 baht, using the fund’s 1.7 million SEK. But those borrowing a second and third time have to pay some rent. Nearly 60 per cent had paid back everything in March 2007.
To give a few examples; one shop used a loan during 10 months and bought a new stock of clothes and renovated the shop. Another is a tour operator where a couple just moved back from one of the camps in Krabi. They used the money to renovate, buy a new computer and fishing gear for their tours. A lady called May, who has mainly Thai customers, could reopen her hair shop in a new place. Until she could open the new shop she sold groceries and took extra jobs.
They also give some support in the post-tsunami camps in Krabi and to some families at the Life Home for HIV-infected persons on Phuket.
“All borrowers start paying back after two to three months. It works very well. But nothing in this world is perfect.”
SMF does not follow the micro credit prototype from Bangladesh.
“The have solidarity groups who pay jointly. Many work only with women. We work with families. And then it’s a matter of what they consider to be a family. We don’t scrutinize that.”
“It has not been used in this way before but was traditionally used for poverty fighting. For instance very poor women, unable to get a bank loan to start anything based on their status of gender.”
SMF believe they are innovators in the way they are using micro loans.
“At the same time as helping people we test if what we know works. We were convinced of that and now also have proof of that. Our theory was right.”
“The optimal is if we can develop a well-working method that could be put into use rapidly when catastrophes occur.”
In the life after Phi Phi they are looking at the next potential next area; perhaps Ethiopia, perhaps Botswana.
“We take one step at a time, not all at the same time. Next up is another country. We must learn step by step.”
“Being small, we can work only in smaller areas. You must be able to cope with it. Otherwise we risk facing an overwhelming situation where you risk ending up doing nothing.”
