Microcredit Revolution, The

UU World: The Magazine of the Unitarian Universalist Association, Mar/Apr 2005 by Emerson, Dorothy May

How small loans to people in poverty are empowering women and transforming local economies around the world

WE HEAR A LOT about the growing divide between rich and poor. We might get the idea that the situation is hopeless, that we are doomed to live in an increasingly divided world. But there is a significant countervailing force at work around the world to overcome poverty and transform local economies toward justice. From villages in India to urban centers in the United States, this movement is changing people's lives step by step, bringing hope and renewal to families, communities, and ultimately, the world.

This effort goes by several names: microfinance, microlending, and microcredit. The people who benefit are called microentrepreneurs. Support comes from individuals, banks, religious organizations and other nonprofits, foundations, governments, and the World Bank. Donors, investors, and people who work in this field are motivated by a of a world where the devastating effects of poverty "no longer cripple the chances of individuals and families to sustain themselves, thrive, and contribute their talents to the world in which they live-where all people have a fair chance at success," in the words of the grass-roots advocacy organization Results.

Increasingly, Unitarian Universalist congregations are embracing this vision and acting on it. It is a timely trend: The United Nations has proclaimed 2005 the International Year of Microcredit in an effort to raise awareness of its importance in the eradication of poverty. "The stark reality," U.N. secretary-General Kofi Annan said in his proclamation, "is that most poor people in the world still lack access to sustainable financial services, whether it is savings, credit, or insurance. The great challenge before us is to address the constraints that exclude people from full participation in the financial sector. Together, we can and must build inclusive financial sectors that help people improve their lives."

Shari Berenbach, director of the Calvert Foundation, estimates that 10,000 microfinance institutions operate worldwide. These include thousands of small, locally based banks, cooperatives, credit unions, and nongovernmental organizations; nearly IOO networks that help the local banks; and large funding organizations such as Oikocredit and the Calvert Foundation. These organizations rely on both donations and investments. Most investments are made for one to five years at low, fixed interest rates. Some investors choose to receive no interest so their money can have more impact. Like mutual funds and stocks, these investments are not backed by insurance, but most established institutions report that they have been able to repay their investors.

In fact, lending money to people living in poverty is good business. Mark Malloch Brown, administrator of the United Nations Development Program, says repayment rates of up to 97 percent in some developing countries have been the envy of big banks and other financial institutions. "Indeed," Brown says, "we should not forget that most businesses everywhere start with just one or two people and grow from there-transforming economies all over the world."

AMONG THE UNITARIAN UNIVERSALIST congregations that have taken up the microcredit cause, two stand out: All Souls Unitarian Church in Tulsa, Oklahoma, and Main Line Unitarian Church in Devon, Pennsylvania.

Ten years ago All Souls member Betty Morrow attended a Washington, DC., conference sponsored by Results, a grass-roots organization working to end hunger and poverty. There she heard Mohammed Yunus, founder of Grameen Bank in Bangladesh, speak about microfinance and learned about the Foundation for International Community Assistance (FINCA), which has organized a global network of village banks. Amazed to learn that it took only $5,000 to sponsor a village bank, Morrow returned home determined that her congregation should do just that.

Morrow got permission from the All Souls board to raise $10,000.The 1,100-member congregation had long been involved with Central America and. decided to sponsor a bank in Managua, Nicaragua. In 1997 six members of the congregation traveled to meet the thirty Nicaraguan women whose bank they had funded. The women of "Miss Betty's Bank" take turns serving as officers and meet weekly in a member's home to collect payments and share successes and concerns. They track each woman's payments on a large chart. The first loans are for $100 and must be repaid over four months. In addition to making their monthly payments, the women are given an incentive to begin building a financial safety net for their families: Once the first loans are repaid, their next loan may be increased by the amount they have managed to save.

Morrow recalls a woman who was part of one of the first banks All Souls funded. She made beautiful dresses for little girls, which she then sold in the local market. Each dress took her a week to make, and she was constantly struggling to make ends meet. With the sewing machine and additional supplies she bought with her loans, she can now make twenty-five dresses a week.The money she earns has helped her family move out of poverty.