Small loans assist poorest of the poor

An expert in providing modest loans to establish self-sustaining small businesses in the Third World can only shake his head at the scope of the financial meltdown in North America.

Alex Counts, president of the Washington-based Grameen Foundation, says the poor are often shunned by the global banking system. "But what happened in the subprime crisis is that people were given incentives to loan to the poor irresponsibly," says Counts, who'll be in Calgary on Saturday to speak at a fundraiser for the Calgary chapter of Results Canada. Results Canada is a national advocacy group that pushes for increased political will to support poverty-fighting options such as microfinancing, which consists of providing small loans, usually less than $200, to individuals to establish or expand a small, self-sustaining business.

"In microfinance, we've set up sophisticated ways to ensure the loan officers work for the benefit of the clients," says Counts. "If a woman in Bangladesh can manage with a $70 loan to start her small business, don't lend her $170. And in fact if you do, you'll be punished, not rewarded."

The Grameen Foundation works with a network of 55 local microfinance institutions in 24 countries, providing modest loans to some of the world's poorest people to start small businesses to support their families. More than 90 per cent of their clients are women and Counts says the payback rate is impressive. Counts says microfinance officers are in the villages of their clients on a weekly basis instead of hidden away in a Wall Street skyscraper.

"There's a close relationship between borrower and lender. If a woman uses a loan to buy two cows, but one dies and she isn't able to pay the loan on the original schedule, you work something out that's appropriate to that individual situation." Counts says there's a spiritual, as well as economic, element to the foundation's work with the poorest of the poor. "You see how a tiny loan of perhaps $80 can act as a catalyst to unlock their entrepreneurial potential and improve their social and economic lives, -- more than you or I will go through in our lifetime," says Counts.

Results Canada organizer Elizabeth Dove says Calgary has one of the most active chapters in the country. "We believe there are enough resources in the world to end poverty everywhere," says Dove. "It just takes the political will. Our members lobby their MPs and write letters to the editor advocating for positive initiatives like microfinance."

Source: http://www.canada.com/calgaryherald