TO OUR CREDIT, Part One:

Bootstrap Banking and the World

Over 100,000 people enter the global workforce every day. Only 20,000 find jobs. The remaining 80,000 must survive through self-employment.

Starting or expanding a business requires capital. Yet, as TO OUR CREDIT demonstrates, many people are unable to gain access to the working capital they need, simply because they're poor and have no collateral. This "credit gap" is a key reason why 1.3 billion people worldwide are forced to live on less than $1 a day, and why over 2 billion are malnourished.

Among the stories that TO OUR CREDIT tells is that of Mursheda Begum, a woman from a rural Bangladesh village. She made beautiful scarves and had no trouble selling them; yet she and her children would often go hungry. To buy raw materials, she was forced to borrow money from local moneylenders, who could guage her desperation and charge such high rates that the interest payments consumed her profits.

It was less than two decades ago that a few microcredit pioneers in Asia and Latin America first addressed the need for working capital. Today, over fifteen million people, including Mursheda, will receive microloans. Access to microcredit is especially important to women; four out of five borrowers worldwide are women.

The field continues to grow. The Microcredit Summit, a nonprofit campaign composed of virtually all microcredit organizations worldwide, has set the goal of reaching 100 million of the world's poorest families by the year 2005.

Since many microborrowers lack conventional collateral, they are often asked to form small groups to guarantee each other's loans. If a member defaults, the group remains responsible for her payments. Repayment rates for most microcredit programs range from 95 to 100 percent.

Well-run microcredit programs are proving to be remarkably effective. Among the facts now available are the results of a recent study of Grameen Bank members in Bangladesh. As many as half of members studied escaped poverty within a ten year period.

Some programs are able to pay for their costs through the interest they collect. This has allowed them to attract commercial investments, a breakthrough which offers new hope to hundreds of millions.

Microcredit differs from most other development efforts in the way it links freedom (in deciding how to use the money) and responsibility (in paying the money back). It is also unique in the way it promotes development one person at a time
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For linkages to more information about microcredit, please select the resources option.

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