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Small Loans Help Millions of World's Poorest, Coalition Says

October 8, 2001

Small Loans Help Millions of World's Poorest, Coalition Says


MEXICO CITY, Oct. 7 — An international coalition of microlending agencies — devoted to financing homespun businesses from the inner city of Chicago to mountain villages in Chiapas — plans to announce on Monday that it has made significant strides toward its goals of helping the world's poorest families.

The group, the Microcredit Summit Campaign, has brought together about 600 experts in microcredit campaigns from throughout Latin America for a meeting in Puebla, beginning on Monday.

It will report that since it began an effort in 1997 to reach 100 million of the world's poorest families by 2005, it has reached about 19.3 million families. Meeting organizers, who also have pledged to help empower women, said loans to the world's poorest people were increasing by 37 percent a year.

Microcredit programs make loans for as little as $40 to help poor people with no credit history start businesses. The programs are aimed mostly at lifting up impoverished areas of the third world. A total of 13.8 million people have been granted loans in Africa, Asia, Eastern Europe and Latin America. But microloans are also made available in urban areas of the United States.

President Vicente Fox of Mexico, who is scheduled to speak at the meeting, had promised to make microfinancing a pillar of his government's antipoverty strategy. But in the 10 months since Mr. Fox took office, his programs have become mired in bureaucratic missteps and stalled by an economic recession.

Queen Sophia of Spain and Muhammad Yunus, the Bangladeshi president of Grameen Bank, who gave out the first microloans in the mid-1970's, are also scheduled to be at the meeting. Grameen, known as the poor man's bank, helps coordinate microcredit investments for individual and institutional investors.

The World Bank has estimated that 1.2 million people around the world live on less than $1 a day, 75 percent of them women.

For years, microlending agencies have been criticized for overlooking the world's poorest people in favor of clients who have at least some business experience and basic financial background. Other microlenders have worried that the poorest people exclude themselves because they believe they are unqualified.

"Too often, the standard in the field is to give loans to people who already have businesses," said Sam Daley-Harris, the director of the Microcredit Summit. "Well, those are not the poorest people."

He added: "Many programs in the world are good at reaching people who already show some financial performance. But they are not strong at reaching further down."

Mr. Daley-Harris said there was little more than anecdotal evidence to indicate the effect microloans had had at lifting people out of poverty. But two recent studies showed that microcredit clients in Mali and Honduras were more likely than nonclients to have larger businesses; to see an increase in personal income and food consumption; to have personal savings; and to feel a greater sense of self-esteem.

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