Development bank encourages antipoverty investment

National Catholic Reporter, March 11, 2005 by Patricia Lefevere

At a time when science, industry and agriculture have seemingly made all things possible, why do tens of millions still hunger and thirst--not only for food and clean water, but also for education, health care, housing and work?

A 30-year-old church-sponsored development bank, Oikocredit, believes it has found a way to eradicate the entrenched poverty that has condemned 4.2 billion of the world's 6.3 billion citizens to life on less than $2 a day.

Oikocredit wants to break the vicious cycle of poverty through what its directors term "the virtuous cycle of your investment." And some 23,000 parishes, religious orders and individuals have joined its campaign (see accompanying story), buying shares at $250 or 200 Euros each. In this way investors support Oikocredit's twin goals: providing underprivileged people access to financial credit essential to the development of economically viable enterprises, and offering churches, religious orders and ordinary citizens a channel of ethical investment.

Investors buy shares for one to five years and are paid a 2 percent dividend yearly. "You can make more on Wall Street," said the Rev. Terry Provance, who directs Oikocredit USA in Washington. But the United Church of Christ minister was quick to cite "the high social impact" that investing in microcredit lending groups has, and how, for Catholics, it supports the church's preferential option for the poor.

Until 1999 Oikocredit was known as the Ecumenical Development Cooperative Society. Begun as an initiative of the World Council of Churches in Geneva in 1975, today it is based in Amersfoort in the Netherlands, with 11 regional bureaus and nine country offices throughout the world. The society tries to promote global justice by challenging individuals, churches and other groups to share their resources through socially responsible investments that will be used to empower disadvantaged people with credit.

One reason why the poor stay poor is because most mainstream banks won't lend to them. A mule is not acceptable collateral. A mud hut cannot be used to secure a loan.

But over three decades Oikocredit has experienced that so-called "unbankable or non-creditworthy people" can manage their own business if they obtain credit. "We rely a lot on character. The character of the loan-seeker is our collateral," said Phyllis Wanjiku Kibui, president of Oikocredit's board of directors, who spoke with NCR in her home in Hackensack, N.J.

What Kibui and other board members have witnessed firsthand is that the poor are able to organize themselves, form a cooperative, make the enterprise succeed and repay the loan. Over its life span, Oikocredit has had to write off less than 15 percent of its loans. To minimize losses caused by currency fluctuations, the society is trying to build self-insurance funds in countries with weak currencies.

Women better risks

Oikocredit has observed that women in developing countries are better credit risks than men. "When a woman gets a loan, she thinks immediately of repaying it; she wants a clean record," Kibui said.

"Even a small first loan will have an impact on her family. Women are content making a little money and getting their kids fed; men will build businesses. This is true in every organization when you split the portfolios," she said.

Recycled investments in the form of repayments of principal and interest at the end of 2003 reached $111 million--money the society used to finance new initiatives

Kibui said she is in an "advantaged position" to see how microeconomic credit helps some of the world's poorest people "gain control of their society and get their dignity."

An accountant by profession, she works for Women's World Banking in New York. The nongovernmental organization helps to provide economic empowerment for low-income women, who, Kibui said, often become more self-sustaining through cooperative efforts and by learning how to access local resources.

The daughter of peasant tea growers in Kenya, Kibui worked in microfinancing in Nairobi's slums before she joined the organization. Initial loans "won't do very much," she noted, but the second, third or fourth loan can allow small enterprises to buy new machinery, extend working capital and improve their output.

At the end of October, Oikocredit's investment capital reached close to $310 million. About half of the capital is in project financing, the other half is in long-term investment. The society has made loans ranging from $65,000 to $2.75 million to some 480 cooperatives and microcredit banks in 67 nations. These financial intermediaries have been able to provide hundreds of thousands of people with microcredit.

Oikocredit USA, a chief mobilizer for the international society, raised more than $1.2 million in 2003 and has set itself an investment goal of $2.5 million in 2005--the year the United Nations has declared the International Year of Microcredit. The society plans to mark Oikocredit Sunday on Oct. 23 and will organize church services and educational programs to alert parishes and church groups about microcredit, economic justice and socially responsible investments.