Microcredit programs offer way to get ahead without being exploited

Tuesday, May 30, 2006

ACCRA, Ghana – The sparkling new bank, down the street from Accra’s bustling Makola market, looks like a financial institution anywhere: six busy teller windows, a new accounts desk, air conditioning holding the steamy heat outside at bay.

But for Ghanaians who have never had access to banking services before, it represents a revolution. After years of seeking small loans from loan sharks, family members and nonprofit microcredit programs, they now have what they never had before: a full-service commercial bank for the poor.

Borrowers — primarily women — can now seek loans for as little as $100 and open savings accounts with even smaller amounts of cash.

Microcredit programs, which offer poor borrowers small loans at low interest rates, have been achieving successes for decades now in countries throughout the world, including Ghana. But the World Bank estimates that only 2 percent of the world’s poor have access to formal banks that offer a range of financial services.

In Africa, where many people live in rural areas and relatively few have enough savings or income to open an account, the lack of access to financial services is particularly acute.

Chicago-based Opportunity International, one of the world’s largest microfinance organizations, is trying to change that by building a network of for-profit commercial banks for the poor in countries from Zambia to Ethiopia.

In Ghana, an initial three branch banks have attracted $2.1 million in deposits and established a $6 million loan portfolio in their first 18 months, said Benjie Montemayor, who heads Opportunity International’s network of commercial banks in Ghana.

Ghana’s legions of small traders are some of the bank’s biggest customers. By banding together to co-sign on loans for each other, they can get credit without collateral.

Rebecca Anderson, 52, an auto spare parts dealer, said she had used her loans to amass a $5,500 stock of spare parts and now made enough profit to put her oldest daughter through medical school.

Montemayor said customers increasingly aspire not just to escape poverty but to become rich.

“We want to see them moving and crossing that poverty line,” he said. “We want to see some millionaires eventually.”