"Providing hope, where all is barren..."
To start a small-scale microcredit program in a poor or developing area, one needs a local contact who understands the process and has some training in the microcredit concept. A local council needs to be organized to administer the loans, collect the interest, and interview those applying for loans. Local leadership and education ensure a broad buy-in at the local level, and a truly caring and efficient administrator can forestall problems that might arise such as favoring family members and friends when it comes to the distribution of loan money. There are always more people looking for loans, than money available, if the interest rates are fair.
Unus’ policy when he went into a village was to look for the poorest person, the one who was too afraid even to come and ask for a loan, and suggest to them that they apply for a loan.
In Haiti where our Haiti Committee has established a small microcredit loan project, called MICAPPI, there are four criteria for receiving a loan.
That there is a good chance that a loan would improve the person’s economic situation.
That the person is part of a group of 5 who have agreed to help each other.
That the person be honest. (The decision of who receives a loan is best made
locally because everyone in a village knows who is honest and who is not.) The decision as to who will be in the group of five must be made by the participants themselves, so that if someone fails to pay back her loan the group accepts responsibility.
That the person seeking the loan has a business plan.
The primary idea behind a microcredit program is to enable the borrower or the cooperative to become independent of an anonymous market system that keeps them at the bottom where only the dregs trickle down. The poor are constantly the prey of loan sharks and middlemen. For instance, transportation of goods is a big problem in Pignon, Haiti, because the poor have no consistently dependable means of transportation. If the resources they need for their “ti commerce” is 25 miles away, they may either have to pay a middleman to procure it for them or pay dearly for their own transportation.
For this reason local and regional self-sufficiency must be encouraged wherever possible, before imports or exports. If goods or raw materials need to be transported from a distance, as often happens in the cities, some sort of cooperative transportation efforts need to evolve. The success of a small business depends on a continuous turnover of goods (so that it is not destroyed by inflation) and a dependable market. This is usually not an export market where credit, slow payments, and irregular orders are most often the rule. It is extremely important that one doesn’t raise false hopes by making promises of markets that one can’t guarantee. If the plan is to export local handicrafts or other products, it is best to arrange to pay up front.
Next: Caveats and Hope