Tag Archive: bangladesh


microcredit micromanaged

Fair trade is an integral part of sustainable human development.  So, too, is microfinance.  People in developing countries need access to credit so they can have the capital to start a business or make their crafts.  Many of the artisans at Beleza got started with a microcredit loan.  Unfortunately, last week’s Economist featured an article stating, among other things, that Bangladesh would be capping the interest rate on microcredit loans at 27%.

Why is this bad?  The interest charged on the loans helps pay for training programs and the administration costs it takes for locally-employed loan officers to bike from door to door establishing new loans and checking on the lending groups.  By capping the interest, Bangladesh is effectively limiting the amount of loans available.  It’s a shame this is happening here, where it all started by the work of Dr. Mohammed Yunus.  I just finished his book, “Banker to the Poor.”

Link to the article:  http://www.economist.com/node/17522606

microcredit

New interest cap will reduce amount of loans available

access to credit

For many artisans participating in fair trade, access to credit is unthinkable.  Or it was.  Dr. Mohammed Yunus, an economics professor in Bangladesh, started the first microcredit program.  He and his institution, the Grammen Bank, both won the Nobel Peace Prize.  Microcredit is a big step towards eradicating poverty and is an integral piece of sustainable human development.  Loans are very small; the average loans are worth $25-$250 for first time lenders.  This money helps people in developing countries buy supplies to make their crafts or materials for farming.

I just did a marketing project on Opportunity International, a large microcredit organization that is active in 15 countries.  They have a 98% repayment rate on their loans – higher than commercial loans.  How is this possible?  Lenders form trust groups of about 30 people.  They meet each week to make a payment on their loan.  If they don’t make a payment, the other members hold them accountable.  Imagine a woman has a sick child so she is unable to go to the market to sell her crafts.  She cannot make her weekly payment.  Someone in the trust group offers to look after her child so that she can sell her goods and then make her payment.  In effect, these loans help build community.  I’m reading Dr. Yunus’s book, “Banker to the Poor” to learn about how it all started.

Many of the products that are sold at Beleza start with a microloan.