Income-Generating Activities - Action Against Hunger

Field handbook • Scientific and Technical Department
when implementing IGA, or in carrying out investments to strengthen existing activities.
For this reason, access to the financial market is considered more of a means
rather than an end.
The existence of informal credit and savings is nothing new. Vulnerable populations
can gain access to loans through traders, family members, contacts etc., and
can deposit savings in community funds. However, in many cases the interest rates
can be excessive, the available services may not be the most adequate for the population’s
needs and the offer of services is often limited to a restricted group with whom
relationships of trust exist.
When defining income-generating programmes, it is important to decide which financial
system is most suited to the level of vulnerability of the target population. The
financial system should be selected depending on the populations’ savings and payment
capacity, assets owned (productive or non-productive) and their existing debts. This
type of information can be difficult to collect, but close contact with the field, conversations
with community members and direct observation can help to obtain a vision
closer to reality. The services offered by other organisations and the existence of community
funds should be investigated.
Even though the ideal would be to initiate IGA with the savings or capital of the
beneficiary population, in many cases some financial support is needed. Three types
of financial mechanisms can be established, depending on the level of vulnerability of
the population with which the project works: subsidies or donations, partial or total
repayment of investment through establishing revolving funds, and support for access
to micro credit.
Chapter 4 details some operational information regarding the three basic forms of
financing explained below.
III.I. Subsidies or donations
The most vulnerable sectors of the population, especially those that have lost their
productive and/or non-productive assets, cannot usually manage to repay the capital
needed to invest in their activities. In these cases subsidies or donations are the mechanisms
most suited to their situation of marginal income. Soft loans or micro credit can
lead them into a situation of debt that is difficult to overcome.
In any case, subsidies must be carried out in a limited manner, just to facilitate the
beginning of the activity. Once the activity is in progress, the households or groups will
have some ability to finance with the income that it generates. In case that support
is still necessary, other forms of finance should be evaluated, in which the beneficiaries
repay a part of the capital invested in the activity.
INCOME GENERATING ACTIVITIES: A KEY CONCEPT IN SUSTAINABLE FOOD SECURTIY
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