Contra Costa Times

February 4, 1997


Small loans relieve poverty

It doesn't take much to lift the poorest of the poor out of poverty. A loan of $100 goes a long way in Bangladesh. A few hundred dollars can be enough for an inner-city American woman to start her own business.

If financial institutions provided more small loans, millions of people could start small businesses, leaving poverty behind forever. The very poor have no access to commercial credit, except through moneylenders who charge exorbitant rates, thus ensuring that the poor remain poor. Small loans with reasonable interest rates can make all the difference.

That's the idea behind the Microcredit Summit that continues through today in Washington, D.C. Leaders from throughout the world are promoting this innovation in banking.

Since its inception 20 years ago, an estimated 8 million people in developing countries have benefited from small loans. But it's not just for Third World residents. Such programs exist in the United States, too, enabling poor Americans to break away from welfare. The microcredit concept is particularly timely now as this country pushes its poor off welfare. Besides giving the poor the tools to help themselves, providing small loans is a relatively inexpensive and effective way to create jobs.

Late payments and bad loan ratios are low, with may financial institutions reporting repayment rats of more than 90 percent. The result is that the loan programs can fund themselves.

Microcredits are a hand up not a hand out. Its past successes are so encouraging hat this year's summit participants are calling to expand loan programs to reach 1000 million by the year 2005. That's an ambitious goal. But with an estimated 2.5 billion people living in abject poverty, it's a goal worth pursuing.

© 1997 Contra Costa Newspapers