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DEVELOPMENT:
Microcredit Makes Strong Inroads
in Latin America and Caribbean
Gustavo
González
SANTIAGO, (IPS) - Reaching 75
percent of the world's poor
families with microloans and
helping to boost the incomes of
those living in extreme poverty
were the two major challenges
assumed at the regional
microcredit summit for Latin
America and the Caribbean.
The 1,200 delegates from all of
the world's continents who met
last week in Santiago, Chile
accepted the proposal set forth
by Bangladeshi economist
Muhammad Yunus, founder of the
Grameen Bank -- the original
"bank for the poor" -- to
increase the number of families
with access to microcredit from
100 million to 175 million by
2015.
Launched in 1997, the
Microcredit Summit Campaign had
initially set a goal of reaching
100 million of the world's
poorest families with credit for
self-employment and other
financial and business services
by the end of 2005, declared the
International Year of
Microcredit by the United
Nations.
By late 2003, 81 million
families had been reached with
microloans, 55 million of whom
were among the poorest when they
took their first loan.
The targets adopted by the
September 2000 United Nations
General Assembly, known as the
Millennium Development Goals,
set a 2015 deadline.
The same 2015 target date was
adopted by the institutions and
organisations taking part in the
Apr. 19-22 regional microcredit
conference, which agreed to work
towards the goal of raising the
incomes of the world's 100
million poorest families, who
scrape by on less than a dollar
a day.
The third challenge will begin
to be faced starting in 2016:
the complete eradication of
poverty in the world - a goal
that can be reached faster in
Latin America, and in Chile in
particular, than in Asia, said
Yunus, a central figure in the
meeting in Santiago that was
also attended by Queen Sofía of
Spain.
Microcredit Summit Campaign
director Sam Daley-Harris said
he was pleased with the progress
made in Latin America and the
Caribbean, where more than 400
microfinance institutions have
been created to provide soft
loans to the disadvantaged in a
region with 220 million poor,
equivalent to more than 42
percent of the population.
Daley-Harris noted that more and
more traditional banks in the
region provide microloans, just
as there is an increasing number
of well-regulated microfinance
institutions that act as an
effective counterweight to the
moneylenders who charge
outrageous interest rates, to
whom the poor often fall victim
for lack of a better
alternative.
And, he added, while strides
have been made in the region,
big challenges still lie ahead,
and a more comprehensive effort
must be made, especially in
rural areas, to expand access to
microcredit among the poor.
Yunus, who founded the Grameen
Bank in Bangladesh in 1976, once
again pointed out that the
lowest-income clients have the
highest payback rates of all,
when they are given access to
loans at reasonable interest
rates, without having to put up
collateral.
He also underlined that 56
percent of the Grameen Bank's
clients in Bangladesh (who are
mainly women) have been able to
leave behind extreme poverty.
According to the main report
presented at the summit, of the
54.8 million poor clients
reached by the microcredit
system worldwide in 2003, 82.5
percent were women.
The number of poor women who
have benefited from microloans
rose from 10.3 million in 1999
to 45.2 million in 2003. Of that
total, 719,000 were in Latin
America and the Caribbean.
Carmen Velasco, executive
director of Pro Mujer in
Bolivia, told IPS that her
women's development organisation
offers small loans to enable
women to set up microbusinesses
while making it possible for
them to set aside part of their
earnings in savings.
"Bolivia is a very competitive
environment for microfinance,"
she said. "Nevertheless, Pro
Mujer has become the most
successful programme by focusing
its work on women who migrate
from rural areas to the poorest
slum neighbourhoods ringing La
Paz."
In Bolivia there are 235,000
clients affiliated with the
Association of Financial
Entities Specialised in
Microfinance.
Microcredit is essential for the
development of microbusiness, a
leading generator of jobs in
countries like Chile, where 82
percent of all shops and other
businesses belong to that
category.
In Central America, 2.5 million
people are self-employed or are
paid employees in a total of
just under 229,000
microenterprises, it was
reported at the summit.
Microcredit is good business. It
establishes a balance between
risk and mutual responsibility
among beneficiaries, and adapts
well to varying cultural and
geographic requirements, the
experts stressed.
But the most noteworthy positive
effects lie in the ability of
microbanking to encourage
savings among the lowest-income
sectors, and to enable people to
pull out of poverty.
"When I went to banks to say I
needed a loan of 40,000 pesos
(around 70 dollars) to open a
pastry business in my home, they
would laugh in my face," Eulogia
Santelices, a 38-year-old mother
of four who is on her own,
commented to IPS. "And when I
went to the moneylenders, I was
offered loans at 10 percent
monthly interest - a really
abusive rate."
Today, Santelices is one of the
satisfied clients of the Fondo
Esperanza (Hope Fund), set up by
the Hogar de Cristo (Christ's
Home), a Catholic humanitarian
organisation in Chile.
The Hope Fund sets up "banks" or
groups of 20 people, with each
member receiving the same
initial 70-dollar loan.
Ninety-eight percent of those
who have received loans meet
their payments on time, which
gives them access to a
130-dollar credit after three
months. Those who continue to be
punctual and reliable in
repaying their loans can work up
the scale, to a 480-dollar
credit.
The Hope Fund now has 25 "banks"
made up of a total of 500
members, the majority of whom
are women.
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