(Tetum) In rural Timorese communities, a large portion of people depend on agriculture for their livelihoods. As agriculture is often seasonal, this can mean incomes can be as well. During the harvest, most farmers have a source of income sufficient to cover their needs, but during other times of the year there are often no savings to pool from.
Inconveniently for the majority of rural workers, high expenditure moments occur when there is no income coming in to families and the communities, especially in July, August and December. During these peak-spending periods when children must be registered for school and university, Christmas preparations made and rice field labourers paid, desperation can set in for low-income earners.
As a result of this problematic ebb in cash flow, many farmers are forced into the usury practices of loan sharks, landing them in more debt and allowing them less control over their finances.
Seeds of Life started with savings and loans initiatives in May 2013, drawing on the experience gained with related groups in Oecusse. Such initiatives are aimed at strengthening the financial assets and social capital in rural communities. For the system to function well, regular deposits are made by the group members each month, with the total sum used to provide loans to group members with a pre-agreed interest rate. This system provides a sense of security to members, and enables individuals to access loans without the risks that accompany loan sharks and illegal lending.
The strengthening of social capital occurs organically, and develops a sense of solidarity, responsibility and discipline, while educating communities in investment and financial planning. As they are self-run projects, each group is responsible for establishing an agreed upon interest rate and sets of rules that must be complied to. The pilot savings and loans projects were established at Fitun Leste commercial seed producer (CSP) in Tequinomata suco, Baucau district and Naroman CSP in Fahilebo suco, Liquica district in May 2013. The one-year mark of the initiative is proving successful and both communities have made significant progress, both socially and financially.
Integration of savings and loans into CSP has proven to benefit the members when it comes to accessing credit and investing. Out of a total of US$4,584 loans made by members of Fitun Leste CSP in Baucau district during the first fiscal year: $2,028 (44%) went to business develop, $540 (12%) went to home improvements/renovations, $460 (10%) went to medical care, $1,166 (25%) went to education, and $390 (9%) went to livestock investment. While Naroman CSP in Liquica district, out of a total of $5,576 loans for the first fiscal year: $35 (6%) went to food production, $1,740 (31%) went to the kiosk, $200 (4%) went to livestock investment, $200 (4%) went to agricultural investment, $100 (2%) went to health care, $1.036 (18%) went to education, and $1,950 (35%) went to home improvements/renovations.