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A Little Goes A Long Way

Ask West Point-educated Charles L. Dokmo why he dedicates his life to making tiny loans to struggling entrepreneurs in the world's poorest countries, and he'll tell you about Bhavna in India.

The 24-year-old woman, recently widowed with a small child, could barely feed her family from a meager income selling noodles by the handful, single eggs and individual bouillon cubes in a storefront she set up in her thatched hut. She was contemplating suicide.

Then, a community organizer linked with Dokmo's Opportunity International group helped Bhavna get a micro-loan of about $50 enough money to buy a few more provisions, multiply her income and make ends meet.

"Now, she has hope," said Dokmo, his eyes welling with tears.

From India to Indonesia and even the United States, micro-finance is gaining ground, expanding beyond its 1970s roots in small, nonprofit organizations to include specialized programs at mainstream commercial banks and such international finance giants as the World Bank.

Even governments are jumping on board. Mexico's new president, former Coca-Cola executive Vicente Fox, this year plans to launch a micro-loan program nationwide, inspired by the success of a statewide program he started as governor of Guanajuato state four years ago.

Advocates say micro-finance helps free the working poor from the grip of loan sharks, who charge exorbitant interest rates, or the rut of too little cash cycling through their fragile businesses. Using creative loan guarantees, micro-lenders offer small amounts of credit at decent rates to borrowers, whom traditional banks long viewed as too risky and their tiny loans too expensive to administer.

"It's more than just lending," said Dokmo, chief executive officer of Oak Brook, Ill.-based Opportunity International, which lends more than $40 million yearly, supporting more than 250,000 jobs worldwide. "I've seen women [in micro-loan repayment groups] in India organize to get electricity, sewage and other basic services for their communities. This also is about dignity and democracy."

Still, it's an uphill climb for micro-lenders to reach the needy. The United Nations estimates that half the world's population lives on less than $3 a day. And while micro-finance is expanding fast, up 25 percent a year in some countries, the tiny loans to the poor still account for less than 1 percent of all commercial lending worldwide, studies show.

To speed outreach, the first Microcredit Summit, held in 1997 in Washington, D.C., set a goal to reach 100 million of the world's poorest with tiny loans by 2005, up from 7 million borrowers that year. Yet just that task will require more than $10 billion in new funds plus training for thousands of new loan officers.

"It's a simple idea, but hard to implement," said Sam Daley-Harris, director of the Microcredit Summit, noting that hurdles also include limited public awareness of micro-credit. "An earthquake makes news, not the tens of thousands who die of malnutrition every day."


Lending money to the poor wasn't always seen as a way to fight global poverty.

Acciˆn International, based in Somerville, Mass., and one of the world's largest micro-lenders, had its roots in charity. The group started in 1961 after an amateur tennis player from the United States, Joseph Blatchford, visited Caracas, Venezuela, and was horrified by shantytowns there.

Blatchford returned to law school in the United States and mobilized classmates, friends and family to donate cash and time to do Peace Corps-type community work in South America installing latrines, building schools and training families in healthy nutrition.

But by the 1970s, the group realized its efforts did not address the deeper problem: lack of economic opportunity for the poor in a region with too few jobs and virtually no welfare system.

So, Acciˆn began to offer low-cost loans to struggling entrepreneurs, folks who repaired cars or sold fruit on the streets to eke out a living. The borrowers generally lacked collateral, tax records or other assets sought by commercial banks, but they agreed to organize with family and friends and fellow borrowers to jointly commit to repay.

Over the past decade, Acciˆn has loaned more than $3.2 billion, mainly in Latin America, with loans averaging $500 each and due within months. Many micro-lenders have repayment rates that top 96 percent better than most commercial banks that target less risky clients.

"The group methodology works, because members cheer each other on. That makes as much difference as the money," said Tracey Talentino, a former Chase Manhattan banker who worked with Acciˆn and now helps run Micro-Business USA in Miami.

Acciˆn is so committed to the future of micro-credit that it's working with mainstream banks to develop micro-loan programs big enough and efficient enough to break even and maybe turn a profit.

"Micro-finance should be integrated into the financial system, not marginalized, so it can be sustained and expanded," said Robin Ratcliffe, Acciˆn's vice president of communications.

Today, few of the estimated 7,000-plus micro-lenders worldwide cover all their costs, depending on donations from governments, foundations and individuals for new funding.


To boost efficiency, micro-lenders are turning to technology. Some Acciˆn loan officers, for example, use wireless, handheld computers to check client records or enter data on new borrowers. That cuts the time officers need to return from the field to central offices, reducing administrative costs, Ratcliffe said.

Borrowers, too, are embracing technology. In Bangladesh, where Muhammed Yunis and his Grameen Bank group pioneered $1 micro-loans in the 1970s, a novel program is bringing phone service to thousands of villages.

Grameen and a European partner offer micro-loans for a cellular phone to one experienced borrower per village perhaps a woman who may have purchased a cow or a sewing machine and repaid Grameen several times. The borrower buys phone time in bulk at a discount and resells it at retail rates to villagers who use the phone.

Micro-lenders were ready to call it a "smashing success" if the phones cleared $2 a day in a nation where incomes average about $200 a year. But profits per phone already run $5 to $30 a day. "People have gotten comfortable with technology faster than anyone thought," said Alex Counts, president of the Grameen Foundation USA in Washington, D.C.

Grameen expects the cell phone program to expand from 4,000 to 10,000 villages by the end of this year, based largely on the strength of its network of 7,000 field workers who have worked with Bangladesh borrowers for years, Counts said.

To be sure, micro-finance alone won't end world poverty any time soon.

The poor also need better education, business training, health care and infrastructure, from roads to electricity. Plus, micro-lenders must "massively scale up services" and become more profitable to draw in more mainstream investors to expand their reach, said Anne Ritchie, a micro-finance specialist at the World Bank's International Finance Corp.

"Only a small fraction of the world's poor are now being served," Ritchie said.

Yet Dokmo and practitioners see hope from a growing move among micro-lenders to improve management and share expertise. And they draw strength despite the odds from micro-credit successes, such as Bhavna in India or Anastacia Abella in the Philippines.

Abella, a woman in her 70s nicknamed Lola, or "grandmother," lived with her four adult children in a shelter made from scrap materials in a squatter's village in Manila. Frequent blackouts made kerosene lamps a necessity.

So, Lola and her family sifted through garbage dumps for jars they'd scrub, fit with wicks and sell for up to 25 cents each. They survived by selling some 150 lamps a day.

Then, the family obtained a $133 micro-loan, allowing them to buy clean jars from their neighbors, double their sales, repay the loan and boost their modest income. "That may not seem like much for our SUV mentality in the United States," said Daley-Harris, of the Microcredit Summit. "But it does make a big difference for that family and for those around them."

Doreen Hemlock can be reached at or 305-810-5009.
Copyright 2001, Sun-Sentinel Co. & South Florida Interactive, Inc.

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