Microlending Gives Dignity to People with Leprosy

Microfinance has gained widespread acceptance since the 1970s as a way to create economic opportunity for the world’s poor. Now the technique is being used to assist the most destitute and shunned members of society — people with leprosy.

In India, microlending has been a powerful tool in helping individuals with leprosy move from a life of begging to economic self-sufficiency, said two social activists speaking at Stanford’s Graduate School of Business on October 6. Padma Venkataraman and Rebecca Douglas described their process for lending tiny sums to leprosy-affected people to start small enterprises. Since 2004, the two women — one the daughter of a former Indian president and the other an American homemaker-turned-activist — have collaborated to develop a microfinance approach tailored specifically to those living in India’s leprosy colonies.

“Nobody thought you could give loans to the leprosy-affected and get repayment back.  You can’t expect beggars to repay your loan,” said Venkataraman, who has worked for more than 20 years on microlending to this specific population.

“The challenges are huge. Many said it couldn’t be done,” agreed Douglas, president of Rising Star Outreach, a U.S. nonprofit group that aids India’s leprosy community. Douglas founded the group in 2002 from her kitchen table after a trip to India left her haunted by memories of beggars with leprosy.
Microlending is supposed to spur entrepreneurship among the working poor. But in India, historically leprosy was viewed not just as a disease, but also as a curse from the gods. People with leprosy typically are ostracized, lack the most basic business and life skills, and might be physically impaired, with deformed hands and feet. How could they make products, get around, and operate a small enterprise?

Yet, Rising Star Outreach has established microlending operations in 46 leprosy colonies in India’s southern state of Tamil Nadu and plans to expand to all 700 Indian colonies over the next several years. Borrowers have used the loans, which range from $20 to $1,000, to start ventures in carpentry, tea selling, cutting hair, cow and goat farming, and more.

“What they need is not our sympathy, but an opportunity to come up in life,” said Venkataraman, in the talk sponsored by the GSB’s student International Development and Health Care clubs.

Proponents of the microfinance movement see it as an innovative way to alleviate global poverty and foster a bottom-up approach to economic development. Loans, deposits, insurance, and other financial services are provided to people traditionally overlooked by financial institutions. Women represent the vast majority of micro-borrowers. The concept received widespread validation in 2006, when Muhammad Yunus of Bangladesh and his Grameen Bank received the Nobel Peace Prize. More than 10,000 microfinance institutions have lent some $25 billion worldwide, according to a 2007 Deutsche Bank report, which also noted that microfinance is attracting growing interest from socially responsible investors.

Venkataraman leads Rising Star Outreach’s microfinancing efforts in India, providing recipients with months of training on basic skills such as handling money, using a bank, or planning. Rising Star Outreach sends some 200 volunteers a year to India to help. 

Eventually, a “welfare committee” consisting of five to seven members of the colony (at least two members must be women) is formed to conduct the microlending, creating a self-policing mechanism within the colony where money is continually lent out, repaid, and re-loaned. The committee scrutinizes and decides on loan applications, collects repayments, and deposits funds. The money plus interest is held in a revolving fund that stays within the colony. 

“When the money is revolving in a colony, if they don’t repay, they’re going to lose,” said Venkataraman. Once a month, each colony sends a representative to a larger meeting with her to provide updates, present bank statements, and discuss common problems or issues.

Unlike the traditional microfinance model where money belongs to the bank, funds are initially donated by Rising Star Outreach to colony members, so the money is theirs to grow or lose, moving them toward self-reliance. “This is making them the bank. The pressure to repay is huge,” said Douglas. “It’s a way of empowering them.”

The two activists described lives transformed by a tiny loan. A man borrowed to buy a teapot and two cups, letting him move from begging in front of a shop to selling tea in front of it and supplying tea to the shop owner. A couple borrowed for a cow, which produced calves, eventually allowing them to earn enough from selling milk to support their sons’ education and marriage. A man who received a loan to do carpentry work trained 12 additional people, some of whom started their own carpentry businesses.

With a budget of about $1 million a year, Rising Star Outreach also owns a site with schools and dorms for children of the leprosy-affected, operates a mobile medical unit that serves the colonies, and runs an art school.

Leprosy is caused by bacteria that can result in disfiguring skin sores, muscle weakness, and nerve damage that can cause a loss of feeling in the hands, feet, arms, and legs. About 5% of the world’s population is genetically susceptible to leprosy, known as Hansen’s disease. Thanks to multidrug therapies, the number of cases in India has been sharply reduced — from 500,000 a generation ago to 250,000 today, said Venkataraman.

This piece originally appeared in Stanford Business Insights from Stanford Graduate School of Business. To receive business ideas and insights from Stanford GSB click here: (To sign up: https://www.gsb.stanford.edu/insights/about/emails)