Home About Us News About Microcredit How you Can Help People We Help Links Contact Us
|
Home About Us News About Microcredit How you Can Help People We Help Links Contact Us |
|
How can the poor afford to pay interest? The reason is they have at their disposal large amounts of under productive labour which, when combined with your loan, can produce very high returns. Many studies have shown that their return on capital can be as high as 300% pa. An extreme example that demonstrates this is that of fruit sellers in India who borrow from loan sharks on a daily basis to buy fruit which they sell to make a living. They repay the lender that day and borrow again the following day. The interest rates that the money lenders charge equate to over 1000% per annum. Yet the fruit sellers can still make a basic living! Imagine the benefit to these fruit sellers if they
could borrow from an MFI at a headline rate Why don't they default? Many microfinance institutions (MFIs) organise their member into self selected groups of 5 borrowers. Loans are made to individuals in the group but future loans to any person are dependant upon the performance of the others in the group. So there is enormous peer pressure to repay the loan. Group members often help each other if an individual is having a difficult time. But also most borrowers are immensely proud of what they do and want to make a success of it. For many it is the only way out of poverty.
Although, as in all new business ventures there are failures, they are far outweighed by the successes. This enables the majority of borrowers to make a profit and the banks to cover their costs. Many MFIs have become operationally self sufficient within 5 years of starting up, so your money can be used time and again to set up new banks all over the world. £100 loaned, can over a 5 year period, enable a family of 5 to rise out of poverty. The money can then be reused time after time to help others. The ultimate proof of success is that borrowers come back year after year for new and larger loans. It is their growing, profitable businesses that enable them to raise themselves out of poverty, save and educate their children for a better life. To deliver the money you provide to the poor in the form of small loans, we use intermediaries. We buy the shares of Oikocredit, a Dutch co-operative, which has proved very effective over 30 years at on lending this money to MFIs. Oikocredit pays a dividend of 2% p.a. and buys back shares at the price they were bought at. MFIs now operate successfully in over 70 countries and the number is growing all the time. One microcredit bank, Procredit, now has $2 billion of assets and 7,500 employees and Fitch, a leading rating agency, has given it an investment grade credit rating. In Bangladesh, where the microfinance movement was established by Grameen Bank in 1976, over $5 billion in loans has been disbursed. In Bangladesh, it is estimated that 1 in 5 of the population benefit from a microfinance loan.
Fund their Future Ltd. Reg. Charity No. 1100200. The Coach House, 38 Cotham Hill, Bristol BS6 6LA. U.K. Tel: 07974 235494 |
of interest of
25% per annum!