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The Role of Microfinance in Addressing the HIV/AIDS Pandemic in Zambia: The Rainbow Model Provides a Future for AIDS Orphans



By Francesco Strobbe, European Central Bank[1]

Poverty and HIV/AIDS constitute a vicious circle. Poverty creates vulnerability to HIV/AIDS, and HIV/AIDS leads to poverty. Unfortunately, the interventions of the national and international community are not moving as quickly as the desperation and the loss of hope in the people coping with the pandemic at the grassroots level.

HIV/AIDS and the SMME Sector in Zambia
Zambia is one of the worst affected countries in the HIV/AIDS pandemic in sub-Saharan Africa. HIV prevalence among adults 15-49 years of age has been roughly 20% since the early 1990s. The impact of the HIV/AIDS pandemic on the country's economy is considerable. The productivity of mines, factories, farms, as well as of small, medium and micro enterprises (SMME) is diminished by the loss of skilled labour due to premature deaths and also by the loss of working time due to illness.

The SMME sector in particular plays a fundamental role in job creation and wealth generation and has become a source of livelihood for a majority of poor people in Sub-Saharan Africa. This sector is largely composed of low income entrepreneurs from the most vulnerable age group (15-49 years). Thus the HIV/AIDS prevalence among adults is affecting the most creative and economically active group of poor people.

The Special Challenge of AIDS Orphans
An additional consequence of the ongoing HIV/AIDS pandemic is the growing number of children who are affected in different ways: children are living with sick parents or sick relatives, orphans are left without one or both parents, and children themselves are HIV positive. UNAIDS estimates that 630,000 Zambian children under the age of 17 have lost one or both parents as a result of AIDS.[2]

While a strong family care system has always existed in Zambia, the traditional mechanism of the extended family came under severe pressure in the mid 1990s. The capacity of the brothers and sisters of deceased HIV/AIDS victims to provide care and support for their orphaned neices and nephews became increasingly diminished, and a growing number of children ended up with grandparents: the "orphan problem" had emerged. A public social security system does not exist in Zambia, which means that care-givers have no access to governmental support. Furthermore, families have been challenged with the introduction of service fees in education and health care, putting extra financial burdens on already poor families. With the rising poverty levels, education and health care are becoming an unaffordable luxury for some families, rather than a basic right for all.

Microfinance and the Rainbow Model of Care for Children

In this emergency context, microfinance can be a powerful tool for addressing the consequences of the HIV/AIDS pandemic in the short-term and for removing the causes of the disease in the medium-long term. The Rainbow model of care for children in distress focuses on both short-term and medium-long term needs, using microfinance as a part of a multi-faceted approach to the problems faced by AIDS orphans.[3] The spirit of Rainbow is to keep the children in related or non-related families, mobilizing the community and networking with the different organizations that are already operating on the field. The model acts as a community based project, coordinating with more than 40 local community based organizations in Zambia with the aim of providing solutions to the different situations faced by AIDS orphans in daily life.

"Not for charity but for justice" is the motto of the Rainbow Model. Investments in human capital are highly effective in promoting growth and development. While orphanages are one solution to handling the challenges presented by AIDS orphans, Rainbow does not consider these children a social and economic "problem", it sees them as the future adults of a society that is disappearing and that needs to be rebuilt as soon as possible. The model aims to preserve the local culture, and return to people the opportunity to have a prominent role in their own development. The program has four main activities: first aid shelter for street-kids, educational support, nutritional centres and microcredit groups.

The microcredit scheme of Rainbow focuses on "awareness groups". These are participatory support groups consisting of families that have already adopted orphans or that are ready to accept them. In these groups the guardians can discuss the psychological problems their children are facing having lost their parents, as well as their own problems in running the family. Most of the families need to be supported in terms of food, education, and health care, but the real challenge is to avoid the "dependence syndrome". For this reason, Rainbow has developed a scheme called the "Twin-Track approach", which aims to find a balance between short term needs and long term self-sustainability.

The first track can be summarized as follows: each family who belongs to an awareness group chooses a small economic activity according to his traditional ability (e.g., selling vegetables or fish, tailoring, agriculture). A two week training course on small scale business is then provided to a group of 20 families in order to build their capacity in money management. The training course combines both theory and practice. At the end of the course, each family prepares a budget proposal for the chosen activity, and is given initial capital as a "soft" loan with a 0% interest rate. If they comply with the loan conditions, they become eligible for a second loan. The idea is to give to the families a sense of justice, so they will not feel like beggars receiving charity.

The second track in the Rainbow model refers to limiting assistance to a certain period of time. After the loan is given, the families start to receive assistance in the form of food and education for the children. The aim of the assistance is to meet basic needs so that families will not resort to using their loans for daily survival or school fees. The assistance is granted for three months, in order to give the families the time to start generate a profit from their activity.

In the year 2004, the Rainbow model reached 18,161 people, of which 14,110 are children, through services provided in its different fields of intervention in Zambia, Kenya and Tanzania. The total number of vulnerable families assisted in different ways by Rainbow in 2004 was 4,824 of which 742 were enrolled in the microcredit scheme, and the annual repayment rate in 2004 varied from 65.25% to 86.27%. All of the families that graduated from the microcredit programme show an increased number of meals per day from one to three, as well as a substantial increase in the number of children able to attend the school. These results represent fundamental steps towards the objective of the self-sustainability.

Thus microfinance can not only provide a solution to some of difficulties faced by orphans and vulnerable children, it can be fundamental in removing causes of the disease, by offering the possibility of education and health care. Microfinance, as part of this larger model of care, has proved to be a tool that has restored hope and dignity in Zambia. In this sense, microfinance can be an effective way to break the vicious circle of HIV and poverty, in favour of a virtuous circle - composed of the opportunity to start a business and the possibility of increasing the number of healthy and educated people, all leading to higher hopes for the future.


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Summary of main recommendations - Impact Study of the Zakoura Microcredit Program
By United Nations Capital Development Fund

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The United Nations Capital Development Fund (UNCDF) is a UN organization mandated by the UN General Assembly and its Executive Board to provide capital assistance first and foremost to the Least Developed Countries (LDCs). UNCDF invests in LDCs in order to support their efforts to reduce poverty and achieve the Millennium Development Goals, especially in its two main product lines - Micro finance and Local Development. UNCDF is part of the UNDP-group and hosts the UN Advisors Group on Inclusive Financial Sectors.
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