How can microcredit lift families from poverty?

Robert Moreau

Research Analyst/Outreach

GENESIS's Mi Cometa project hopes to bring assistance to 157 families

Presently, GENESIS will be supporting a microcredit initiative to bring relief and opportunity to 157 families in South Guasmo, Guayaquil, Ecuador. The Mi Cometa project hopes to create small business and economic growth in an area where families averaging five members live on monthly incomes of only U.S. $250, using an approach that has achieved global prominence as a way to reduce poverty.

A short introduction to microcredit

As noted by Empower Global, microcredit “involves providing small sums of capital, often as little as $75, to micro entrepreneurs to enable them to establish or expand their business and become self-reliant.” These small businesses, the summary goes on to note, employ “two people (usually a husband & wife, and benefits an entire family which on average consists of five people (a husband, wife & three children).”

On microcredit’s potential, Empower Global summarizes: “each micro-loan funds 1,000 businesses, creating or supporting 2,000 jobs and helping to transform the lives of 5,000 impoverished people.” These loans have an “impressive track record” of 95-98 percent repayment rates.

Though “microcredit” may seem to be a fairly new concept, its history dates back to 1976 when Dr. Muhammad Yunus of the University of Chittagong, Bangladesh founded the Grameen Bank as a pilot project in the village of Jobra. By 1983, it was formally incorporated as an independent bank.

Microcredit’s greatest successes came in 2005, when the UN celebrated in International Year of Microcredit, and 2006, when Dr. Yunus won the Nobel Peace Prize for his pioneering work with Grameen.

Microcredit program example (diagram), Vietnamese Heritage Institute

Examples of microcredit organizations/projects

  • Grameen Bank (Bangladesh):  The organization that started microfinancing, Grameen currently has 2,564 branches in 81,351 villages, with a total staff of 23,133. Since its inception, it has paid out Tk 522.24 billion ($9.09 billion in loans), with 463.24 billion (US $8.05 billion) repaid.  95 percent of the bank’s total equity is owned by its borrowers.
  • Ruwentu Women’s Micro-credit program (Uganda): Started by the Umoja Operation Compassion Society of British Columbia, this project began in 2007 when the organization raised $1,000 to lend to ten women (about $60 each) in the village of Ruwentu to start various businesses. As of February 2009, the project scope expanded to 23 beneficiaries.
  • BancoSol (Bolivia): Originally founded in 1986 as the “Fundacion para Promocion el Desarollo de la Microempresa,” BancoSol became the first commercial bank specializing in microfinance in 1992. Today it is active in eight major cities in Bolivia, and has over 100 branches. As of 2008, it had 109,763 active borrowers. Its status as a commercial bank has led to some concern over mission drift.
  • World Job and Food Bank (various): A Canada-based organization with United Nations (ECOSOC) consultative status, the WJFB grew out of the Calgary Interfaith Food bank starting in 1982 and was formally registered as a charity in 1986. Their various initiatives have included two three-year (2001-2004) microcredit projects in Peru and Bolivia.

As should be noted, no single approach towards eradicating poverty is an instant cure-all, and microcredit itself has not been without controversy. However, microcredit has proven itself over its 34-year history to be an effective and novel tool to enable families to lift themselves into self-sufficiency.

Mi Cometa (GENESIS): Building on microcredit’s success

The Mi Cometa initiative looks to continue microcredit’s strong history of enabling opportunity for those in need. Focusing on an area where the average income is less than half of what is required for an adequate living in Ecuador, its goal is to work with families through education as well as loan-granting, with a 50-hour training program covering such diverse areas as microcredit, marketing, and leadership.

GENESIS is hoping to raise $17,500.00 for this initiative, and any donation is appreciated.

Reader Questions: What do you think of microcredit as a way to address global poverty? What benefits or drawbacks (mentioned or not in this post) do you see it as having? What do you think about GENESIS’s Mi Cometa project in terms of what it offers or could offer? Responses to these, as well as all other questions and comments, are strongly encouraged.

Learn. Connect. Travel. Volunteer. Build. Empower…Change the World.
Posted in Articles and tagged , , , , , , , , .