Tag: Solidarity finance

Understanding the financial tools deployed by SIDI

SIDI has several financing tools at its disposal to support the activities of its partners. For SIDI, “equity investments” consist in acquiring a stake in the capital of partner companies, in order to strengthen their equity capital and support them in their long-term development.

Loans” enable our partners, in particular producer organizations, to pre-finance their members’ harvests.

So what is Daman? Through this article, we wish to highlight this Palestinian guarantee fund, an unusual and innovative means of financial resistance, which, on its own scale, attempts to support the most vulnerable civilian populations.

A little history…

It took almost 10 years to create Daman in 2015, a Palestinian company whose shareholders were initially SIDI, ACAD Finance and ASALA (the latter two being SIDI’s partner Palestinian microfinance institutions). In 2019, the Daman guarantee fund is being replenished thanks to initial co-financing from the Luxembourg government and the NGO CPJPO[1], enabling it to scale up.

One of the main strengths of the Daman guarantee fund is that it has identified “political” risk, i.e. the deleterious effects of the violent occupation of Palestine by the Israeli army, as the main risk to be covered for Palestinian micro-enterprises.

Of course, the initiators of Daman, both at SIDI and ACAD Finance, never imagined that after the bloody and murderous Hamas attack in 2023[2], the terror imposed by Israel, which amounts to war crimes, crimes against humanity and even genocidal risk, would “wipe out” part of the population[3] and the entire infrastructure[4] of the Gaza Strip.

The guarantee fund patiently built up thanks to subsidies from Luxembourg has proved insufficient to meet needs in Gaza, but also in the West Bank, where joint pressure from settlers, the police and the army is leading to violent events and the physical isolation of Palestinian communities and towns. This is a challenge for Daman and especially for its future financing, but it does not prevent it from operating and “doing its bit” in a sometimes dramatic context.

[1] Committee for a Just Peace in the Middle East – https://paixjuste.lu/

[2] Over 1,200 dead, mostly Israeli civilians

[3] 72,000 dead and 180,000 wounded, mostly women and children

[4] 92% of buildings destroyed

How does the Daman guarantee fund work?

Each year, depending on the amounts available, Daman allocates a sum to each of the three Palestinian microfinance institutions: ACAD, ASALA and REEF. These three microfinance institutions inform Daman of the outstanding loans which will benefit from this coverage and which meet the repayment criteria. No money is transferred. This is the maximum global sum that the microfinance institution can claim from the guarantee fund, if it ever demonstrates that its client has been unable to pay its loan because of the Israeli occupation.

Conditions for repayment and cancellation of Daman guarantee fund debts

The Daman guarantee fund doesn’t repay just anything and everything. Insured” loans must be under US$10,000, for a maximum of 48 months, for income-generating activities. Consumer loans are excluded. Daman reimburses only the principal, i.e. unpaid interest is assumed by the microfinance institution. If the customer has been in default for more than a year, then the microfinance institution can turn to the Daman guarantee fund to request repayment. And if the customer was already in default (late payments) before the “accident of life” linked to the military occupation, the loan is not eligible for repayment.

For their part, microfinance institutions contribute 1.5% of the guaranteed portfolio to Daman’s costs.

In the field, concrete examples to illustrate the situation

Mohamed H applied for a loan of US$4,000 for his cage-making workshop, which enables him to raise poultry. During the attack on the Tulkarem refugee camp in early 2025, Israeli bulldozers razed his workshop to the ground. Mohamed H lost everything.

There’s also the story of Assel A, who had taken out a loan to invest in her market gardening activities by installing a greenhouse. The village where she lives was “closed” by settlers for a few days. She was unable to access it and irrigate the fields. The entire harvest was lost, and the tarpaulins were lacerated by the settlers.

These two customers are unable to pay their loans, and provide a concrete illustration of the colossal difficulties encountered by Palestinians in maintaining an income-generating activity in the context of war.

The microfinance institution that granted the loan can then submit a claim for reimbursement to the Daman guarantee fund by preparing a file. If the claim is admissible, Daman appoints an “expert” to verify the veracity of the facts. If the report is favorable, Daman can then disburse the funds to the microfinance institution and cancel the customer’s debt. Around 85% of applications submitted by microfinance institutions to the Daman guarantee fund are accepted.

This makes it easier for Palestinian microfinance institutions to rely on this mechanism, which covers part of the financial risks incurred. By reassuring Palestinian microfinance institutions, it is ultimately vulnerable populations who benefit more easily from loans to invest in income-generating activities, despite the war.

In 2024 (annus horribilis given the total losses recorded in Gaza), Daman was able to compensate $332,623 from 386 customers of the three microfinance institutions[1]. To conclude, let’s give the floor to the evaluator commissioned by :

The evaluation of the project shows that, despite all the constraints linked to the context, Daman remained operational and played a stabilizing role by enabling MFIs to benefit from its risk coverage. This enabled them to lend to very vulnerable customers, which would probably not have been possible without Daman.[2].

The big challenge remains: how can Daman be sustainably capitalized to meet the very specific needs of a zone of war and occupation such as Palestine? This is what Daman and its shareholders need to do!

[1] US$634,000 since the start of the Daman operation

[2] Project evaluation of Daman for SME’s by MFR

Who’s Kitagata ?

In southwestern Uganda, the Kitagata Mixed Farmers cooperative plays a key role in improving food security and incomes for smallholder farmers. Created in 2013 on the initiative of the farmers themselves, it meets a fundamental need: to have a common space to share the challenges encountered in the field, build collective solutions, and have greater influence with local economic actors. SIDI supports this partner through its locally based branch in Kampala, Soluti. Kitagata mainly sells millet and beans to Ugandans.

A diversified offering for members

Initially active in the Sheema district, Kitagata has gradually expanded into the neighboring districts of Bushenyi, Mitoma and Rubirizi, with a simple rationale: to pool efforts, increase production volumes collected, and better defend the interests of its members. Its vision is clear: to promote local food production and fight hunger, in a context increasingly constrained by climate change.

In addition to market access, the cooperative has developed a diversified range of services to best meet the needs of its members: literacy sessions, training in financial management, and assistance in structuring small village savings groups and
credit. In 2024, Kitagata also began granting cash advances to producers, enabling them to meet the needs of the agricultural season.

Kitagata is strongly committed to promoting gender equality. Women account for 66% of the cooperative’s beneficiaries, and specific programs are set up to meet their needs as effectively as possible: this is particularly true of certain groups of widows, who are a very vulnerable group in Uganda, and to whom the cooperative provides additional services.

Facing up to climate challenges

In recent years, the farmers supported by Kitagata have been particularly hard hit by the vagaries of climate change: unpredictable seasons, droughts and declining soil fertility. These shocks severely affect the production of food crops such as millet, maize and beans. Faced with this reality, the cooperative has chosen to become actively involved in promoting more sustainable agricultural practices, adapted to local conditions.

Thanks to the presence of two agronomic technicians on its team, Kitagata raises awareness of environmental issues and supports its members in implementing agroecological techniques: crop rotation,
interculture, use of organic manure, mulching, responsible management of wetlands, rainwater harvesting and storage. This support is provided either on an individual basis, to meet the specific needs of producers, or collectively, in areas specifically dedicated to training, known as “demo gardens”.

A structuring project with SIDI

In 2024, SIDI supported the cooperative in strengthening its social and environmental commitment thanks to a structuring program funded by SSNUP, designed around several complementary components:

– Economic and social: to diversify producers’ income and strengthen their resilience in the face of climate change, the cooperative has set up training in cassava cultivation, an emerging sector with high potential and adapted to local climatic conditions.

– Gender component: training for trainers in the GALS (Gender Action Learning System) participatory methodology was organized. This community-based approach aims to empower women and men, and combat gender inequalities in households as well as within organizations.

– Environmental aspect: the cooperative has launched an agroecology training program, specifically applied to cassava cultivation, for its small-scale producers.

Some key figures about Kitagata

What role do international rating agencies play?

Since the late 2000s, rating agencies have developed along the lines of their conventional financial counterparts, to ensure that microfinance institutions follow sound management practices. Indeed, against a backdrop of massive demand for financial services from small-scale entrepreneurs in the informal sector, some players may have seen this as a huge market with more potential for profit than impact… as evidenced by the recurrent scandals in certain countries that have been reported in the media.

These agencies, including MicroFinanza Rating, a pioneering leader based in Milan, play an important role in this respect, since they analyze in detail the data and practices of microfinance institutions, leading to an independent rating. More importantly, they help to spread best practice in the sector, leading to the development of internationally recognized standards. These standards are then set by the Social Performance Task Force, an NGO that brings together all the players involved.

Customer protection: what exactly are we talking about?

One of the major challenges of these best practices is to protect customers. Vulnerable populations, often poorly educated in financial matters, can easily fall into spirals of over-indebtedness, or even be the target of fraud. These standards will therefore ensure that the microfinance institution takes every measure in its power to prevent a beneficiary from becoming over-indebted.

Similarly, microfinance institutions must ensure that customers can fully understand the conditions of the loans (rates and various fees, procedures in the event of arrears, etc.) they are about to take out. For example, microfinance institutions offer contracts in local languages, with explanations given orally and not just in writing. This set of best practices has been brought together in a recognized standard known as the “Client Protection Pathway”.Client Protection Pathway“.

In Kenya, Yehu Microfinance rewarded for its efforts to help the most marginalized populations

Kenya is East Africa’s leading economy. It is a leader in technological innovation to enable financial inclusion of marginalized populations, with the invention of “Mobile Banking”, i.e. the possibility of paying or saving with a simple cell phone, long before the arrival of smartphones. Microfinance has also been developing very dynamically for over 20 years, but without any real regulatory framework.

By obtaining the silver level of ” Client Protection Certification “, Yehu Impact Limited demonstrates that it has met and exceeded a set of rigorous criteria on the quality and ethics of its practices to protect its clients. This recognition reinforces Yehu Impact Limited’s credibility in terms of social impact: the money invested serves the development and autonomy of vulnerable communities, and their economic integration.

Who is Yehu Microfinance?

Yehu Impact Limited is a microfinance institution founded in Kenya in 1998 by Choice Humanitarian, an international NGO. It began its activities by organizing women’s groups and facilitating their access to savings. Today, Yehu Impact Limited reaches over 70,000 beneficiaries, mainly rural women, with the aim of empowering their communities through affordable, sustainable and socially responsible microcredit.

Yehu Impact Limited provides financial education to the most vulnerable populations through a series of training courses on financial management. In this way, the microfinance institution supports the creation of income-generating activities in agriculture, green energies, micro-insurance and other areas.

SIDI is particularly proud of the Yehu Impact Limited teams’ commitment to inclusive finance. This client protection certification is part of the recognition of this microfinance institution’s efforts to empower the most marginalized communities in rural Kenya.