Microcredit Movement Tackling Poverty one Tiny Loan at a Time
Wednesday, October 3, 2007
A Peruvian widow borrowed $64 and bought a few pigs. For $55, a villager in Ghana went into the mineral-water trade. A mother of nine in Guatemala upgraded her grocery store with $250.
These women from three continents have something in common: They are beneficiaries of microcredit – very small loans to very poor people for very small businesses. The benefactors, in many cases, are ordinary individuals inspired by a movement that is reshaping philanthropy and making it as accessible as the click of a mouse or a visit to a house party.
More and more of us are becoming convinced that lending even tiny amounts of money to destitute people in the developing world can transform lives – theirs and ours.
“My life has changed because of this loan,” said 27-year-old Patience Asare-Boateng, in a phone interview from Ghana.
“This is something that people want: a sense of connection and a sense of community,” said Bob Graham, founder of NamasteDirect, a microcredit organization in San Francisco. “Because it’s decreasing in our daily lives.”
The microcredit approach carved out in Bangladesh three decades ago by 2006 Nobel Peace Prize winner Muhammad Yunus has inspired a war on poverty that blends social conscience and business savvy – especially in Northern California.
“It’s so recently exploding there,” said Sam Daley-Harris, director of the Microcredit Summit Campaign in Washington, D.C.
Jonathan Lewis, who runs a Davis nonprofit that lends money to poor women, called the region “one of the hotbeds of microfinance” in the United States.
In San Francisco, Kiva.org has raised $12 million from more than 120,000 lenders since 2005, and NamasteDirect has gone from 75 to 1,100 donors in the same amount of time. In Davis, MicroCredit Enterprises has funded 55,000 entrepreneurs, and Freedom from Hunger is serving 700,000 women.
Although Yunus, widely regarded at the father of the modern microcredit movement, made his first loan in 1976 and established Grameen Bank – lending to the poorest of the poor – 24 years ago, microlending only recently started seeping into public consciousness. Former President Bill Clinton has enthusiastically endorsed it, the United Nations declared 2005 the International Year of Microcredit and Yunus won the Nobel almost a year ago.
“Now you have something that’s really validated,” said Matt Flannery, chief executive officer of Kiva.org. “It’s a quick way for people to think, ’OK, what you’re doing is legitimate.’ “
Daley-Harris, director of the Microcredit Summit Campaign, agreed – up to a point.
“It’s off the back burner,” he said. “But the Nobel is not the boost that ’An Inconvenient Truth’ has given climate change. It’s sad, really, when we know what Lindsay Lohan is up to, but we don’t know about things that could make a difference.”
How much of a difference? Detractors say microcredit is a drop in the bucket, given the scale of world poverty, or that it absolves governments and institutions such as the World Bank of responsibility. Some companies new to the field, such as 3-year-old Omidyar Network in Redwood City – started by eBay c0-founder Pierre Omidyar and his wife – insist that making a profit is as important as having a sense of mission.
Banco Compartamos, a Mexican microfinance institution, raised the stakes in April when it completed an initial public offering and sold 30 percent ownership of the bank, providing $450 million to existing investors.
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