Microlending

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Microlending
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Poverty is not Created by the Poor

• Poverty comes out of the structures and policies
  of society
• Change these policies and structures, and the
  poor will change their own lives
• Given even small loans, the poor are fully
  capable of improving their lives
• The UN declared 2005 the International Year of
  Microcredit. Currently, over 100 million people
  are using microfinance loans.

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Micro Loans

• Microfinance small loans to help poor people
  improve their lives
• Loans range from 40-200
• People who receive the loans have an excellent
  rate of repayment over 95

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Why Microfinance is needed

• 1.2 billion people live in absolute poverty, or
  on less than US1 a day. India has 400 million
  poor people, more than any other country in the
  world.
• Many own no land and work as farm laborers they
  have no savings to fall back on in emergencies.
• Without collateral, or something to guarantee a
  loan, the poor are not able to get bank loans.
• They may use money lenders who charge interest
  rates as high as 72 per year. This often results
  in the poor putting themselves or their children
  into bonded labor--where a person "sells" his or
  her labor for a year in exchange for a loan.

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Why Microfinance is Needed

• In many countries, women do not inherit land and
  may lose their property when her husband dies or
  divorces her
• Poverty levels have increased in all communities
  affected by HIV/AIDS. Women are usually the
  caregivers and also those who take in orphans, so
  they carry an extra economic burden

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Grameen Bank model

• Dr. Muhammad Yunus returned to Bangladesh after
  receiving a PhD in economics in the United
  States.
• Prof. Yunus realized that economic theories and
  practices were useless in dealing with the abject
  poverty he saw every day. He talked to 42
  impoverished women from a nearby village and
  found that they were all hardworking people who
  were paying outrageous fees to suppliers because
  they could not pay in cash. Dr. Yunus found out
  that US27 was all that was needed for the women
  to buy their supplies directly and bypass the
  creditors. He gave each of the woman a small
  loan, and was quickly paid back- and each of the
  women had enough profit to continue to directly
  purchase their supplies-instantly making more
  profit than they ever had before.

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Grameen Bank model

• 5-member groups of women
• Weekly payments are very small and manageable
• Social Collateral The group guarantees each
  members loan. If one member does not repay, no
  one in the group can get another loan until it is
  paid.
• Small first loans to learn about repayment
• Interest and loan repayments are kept simple so
  math skills are not needed.
• Loans are usually made to women because they are
  the most marginalized and because they tend to
  spend their profits on food and healthcare and
  their children.
• Only loans no training or business courses. They
  believe that people are best able to decide for
  themselves what they can do. Most already know
  what, they just need help getting started with a
  small loan.

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Grameen Bank model

• In 2005 the Grameen Bank will reach over 5
  million borrowers.
• 96 are women. Many are illiterate, impoverished,
  live in distant rural areas without modern roads,
  telephones, and electricity.
• 99 pay back the loan completely

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Saalibai is a Banjara tribal woman from the
village of Kondapur. Her husband died, leaving
her with a young son. Unable to manage, she moved
into her brother-in-law's house. Initially,
Saalibai borrowed Rs. 4000 (US95) for a water
buffalo. (Most villagers already have the skills
to take care of milk-producing animals). However,
her brother-in-law began harrassing Saalibai and
taking her money. Unable to make her weekly loan
repayments, Saalibai had to sell her buffalo and
return what she had borrowed. But Saalibai did
not lose hope. Her husband had left her a small
plot of land that lay neglected because she did
not have money to till the land. Saalibai
arranged to take a Rs. 1000 (US25) loan with
which she bought manure and hired local villagers
to help cultivate the field. She repaid her loan
and made Rs. 2000 (US50) profit. Saalibai has
now built a small home for herself, and has also
taken a second year loan of Rs. 6,000 (US75) for
a buffalo.
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What You Can Do

• Tell People about these organizations!
• Arabic Microfinance GatewayThe first major
  online resource for microfinance in the Arab
  world. www.arabic.microfinancegateway.org
• French Microfinance Gatewayhas discussion
  groups, job bank, etc.www.french.microfinancegate
  way.org
• Reach the Children Focus is underprivileged
  children in Africa w/ programs in AIDS
  Prevention, Education and Health,
  Micro-Enterprise, Orphan Care, and
  Water/Agriculture. www.reachthechildren.org
• Swayam Krishi Sangam SKS uses the Grameen
  Methodo to provide microcredit services in India.
  www.sksindia.com
• United Nations http//un.org
  www.yearofmicrocredit.org
• Visayas Enterprise Foundation The Visayas
  Enterprise Foundation is a microfinance
  institution in the Philippines that uses the
  Grameen Methodology. They are a partner of
  Enterprise Mentors International.www.enterprise-m
  entors.org/PartnerFoundations.asp
• Yehu Bank A microfinance program working in
  rural Kenya. www.yehu.org

• Start a Giving Circle
• ACCIÓN International Serves Latin America, the
  Caribbean, Asia, and Africa. www.accion.org
• BRAC One of the largest MFIs in the world. It
  serves the poorest people in Bangladesh.www.brac.
  net
• Financiera Compartamos Serves the poor in Latin
  America. www.compartamos.com
• FINCA International Programs in Latin America,
  Africa, and the Newly Independent States (NIS).
  www.villagebanking.org
• Grameen Bank http//www.grameen-info.org
• HELP International A college-student initiated
  and run organization that places college-age
  volunteers in Latin America to work with existing
  community-based programsincluding microcredit
  institutions.www.help-international.org
• ProMujer Provides health and business
  development education along with microfinance
  services. They have programs in four Latin
  American countries. www.promujer.org

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• A GROWING MOVEMENT by Todd Manwaring, Managing
  Director, BYU Center for Economic Self-Reliance
• In the 1970s and 1980s, the pioneers of the
  microcredit movement such as the Grameen Bank,
  ACCION International, and FINCA International
  started spontaneous efforts to provide these
  small loans as a way to help impoverished
  families escape the bonds of poverty through
  enterprise. It truly was a revolution in
  banking.
• By the end of the 1990s, thousands of
  microfinance institutions were providing
  microcredit services to 23.5 million borrowers
  worldwide. These microfinance institutions
  usually came in two main forms, the nonprofit
  organization and the regulated financial
  institution. Networks and associations of or for
  the microfinance institutions also surfaced in
  the 1990s to support the organizations and
  improve the impacts of their microcredit efforts.
  One such organization, the Microcredit Summit
  Campaign, a consortium of over 3,000 microfinance
  institutions, has established a target in support
  of the Millennium Development Goal to bring
  microcredit services to 175 million of the
  world's poorest familiesthose living on less
  than US1 per day or the poorest half of those
  living in poverty for a given countryand ensure
  that 100 million of these families move out of
  the "poorest" category.
• The microcredit movement is gaining the momentum
  needed to achieve these goals. The United Nations
  declared 2005 to be the International Year of
  Microcredit.
• Many of the thousands of microfinance
  institutions worldwide are providing more
  innovative financial products and services to
  meet the needs of families they serve, such as
• Multiple loan products (home, education,
  agricultural, etc.)
• Additional educational services (health care,
  business development services, human rights,
  etc.)
• Integrated insurance programs (health, life,
  home, etc.)
• Furthermore, the microfinance institutions
  themselves are changing. Many are replicating
  their services in additional countries. Some are
  transforming into regulated banking institutions.
  A few are accessing capital via worldwide markets
  rather than relying on donations and grants. As a
  movement, metrics and systems are being put into
  place to better rate and qualify the microfinance
  institutions as well.
• Microcredit is not a panacea to poverty. However,
  it is a powerful tool that provides many of the
  tangible and intangible resources needed to help
  the poorest to lift themselves out of poverty
  through self-employment. We believe that the
  microcredit movement will continue to grow in
  impact, status, and acceptance, and will become
  increasingly recognized as one of the most
  innovative methods to have positively altered
  economic and social systems for the poor in all
  parts of the world.
•  
• There is a short video preview here
  http//www.pbs.org/kbyu/smallfortunes/