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The world's smallest loans 
at the lowest rates to the world's 
poorest people - mainly women

More than 2,000 practitioners of microcredit - the world's smallest loans made to the world's poorest people at low or very short-term rates - met in Washington in February 1998, for the first 'Microcredit Summit.'  The goal of the Summit?  To reach 100 million of the world's poorest families, with credit for self-employment and other financial and business services by 2005. 

From a few visionary experiments started in the late 1970s in India by Ela Bhatt, founder of the Self-Employed Women's Association (SEWA), and in Bangladesh by Muhammad Yunus, founder of the Grameen Bank, microcredit has spread to hundreds of financial institutions and micro-credit banks, reaching about eight million people in developed and developing countries and handling billions of dollars a year. 

SEWA's first micro-loan in 1975 was about US$ 1.50 to a poor woman to buy herbs which she sold by day making enough profit to buy the family dinner at night.  Seed money for loans have been given by non-profit making institutions, donor agencies and private foundations that have, so far, provided the vital subsidy that has resulted in the rapid expansion of micro-enterprise. 

MICRO-LOANS 
There are numerous models for monitoring loans, but most borrowers must, at least initially, join a group of other borrowers.  The group itself monitors payback progress and only when all group members have paid back their loans can any individual borrow further.  This creates a pressure on all members of the group to fulfill their obligation.  Overall, payback rates are above 90% and as high as 98%.  Micro-loans average $150, but loans of $10 - $50 are not uncommon. 

According to data presented at the Microcredit Summit by the Foundation for International Community Assistance (FINCA), village borrowers in El Salvador ultimately increased their weekly incomes by 145%.  At the Summit James Gustave Speth, the Administrator of the United Nations Development Programme (UNDP), announced an expansion of micro-loan services with a new $41 million programme called MicroStart to be jointly funded by UNDP and donor nations, to which Finland has made the first $1.1 million contribution. 

Hillary Clinton, who was the Summit's Honorary Co-Chair, announced that the US current budget would include $1 billion to be spent over five years on micro-enterprise as part of the Community Development Financial Institutions Fund. 

WHAT NEXT? 
About 40 commercial banks and lenders were represented at the Summit.  Some bankers made on-the-spot pledges.  Alberto S. Bresh, President of Panama's Multi-Credit Bank, said he would raise his current 1,700 micro-loan customers to 8,500.  Mohua Mukherjee, Assistant General Manager of Citibank's Nairobi office, said its goal would be to reach one million Kenyans with micro-credit by the year 2005. 

The Summit Report, The Earth Times, comments "As potent a device as micro-credit appears to be, the question remains.  After the loan, what next?  Will governments and the private sector reinforce and complement micro-credit success with deeper investments in social infrastructure?" 

The Grameen Bank started in 1976 by lending $27 to 42 poor people in Bangladesh.  Today, Grameen reaches two million borrowers, with more than $1 billion lent and $1818 million generated in savings. 

Source : International Women's News Vol. 92 No 3 1997
REF: WAI/MC9

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