By IPS Correspondents
SANTIAGO, Apr 25 2005 (IPS)

Reaching 75 percent of the world’s poor families with microloans and helping to boost the incomes of those living in extreme poverty were the two major challenges assumed at the regional microcredit summit for Latin America and the Caribbean.

The 1,200 delegates from all of the world’s continents who met last week in Santiago, Chile accepted the proposal set forth by Bangladeshi economist Muhammad Yunus, founder of the Grameen Bank – the original “bank for the poor” – to increase the number of families with access to microcredit from 100 million to 175 million by 2015.

Launched in 1997, the Microcredit Summit Campaign had initially set a goal of reaching 100 million of the world’s poorest families with credit for self-employment and other financial and business services by the end of 2005, declared the International Year of Microcredit by the United Nations.

By late 2003, 81 million families had been reached with microloans, 55 million of whom were among the poorest when they took their first loan.

The targets adopted by the September 2000 United Nations General Assembly, known as the Millennium Development Goals, set a 2015 deadline.

The same 2015 target date was adopted by the institutions and organisations taking part in the Apr. 19-22 regional microcredit conference, which agreed to work towards the goal of raising the incomes of the world’s 100 million poorest families, who scrape by on less than a dollar a day.

Microcredit Summit Campaign director Sam Daley-Harris said he was pleased with the progress made in Latin America and the Caribbean, where more than 400 microfinance institutions have been created to provide soft loans to the disadvantaged in a region with 220 million poor, equivalent to more than 42 percent of the population.

Daley-Harris noted that more and more traditional banks in the region provide microloans, just as there is an increasing number of well-regulated microfinance institutions that act as an effective counterweight to the moneylenders who charge outrageous interest rates, to whom the poor often fall victim for lack of a better alternative.

And, he added, while strides have been made in the region, big challenges still lie ahead, and a more comprehensive effort must be made, especially in rural areas, to expand access to microcredit among the poor.

Yunus, who founded the Grameen Bank in Bangladesh in 1976, once again pointed out that the lowest-income clients have the highest payback rates of all, when they are given access to loans at reasonable interest rates, without having to put up collateral.

He also underlined that 56 percent of the Grameen Bank’s clients in Bangladesh (who are mainly women) have been able to leave behind extreme poverty.

According to the main report presented at the summit, of the 54.8 million poor clients reached by the microcredit system worldwide in 2003, 82.5 percent were women.

The number of poor women who have benefited from microloans rose from 10.3 million in 1999 to 45.2 million in 2003. Of that total, 719,000 were in Latin America and the Caribbean.

Carmen Velasco, executive director of Pro Mujer in Bolivia, told IPS that her women’s development organisation offers small loans to enable women to set up microbusinesses while making it possible for them to set aside part of their earnings in savings.

“Bolivia is a very competitive environment for microfinance,” she said. “Nevertheless, Pro Mujer has become the most successful programme by focusing its work on women who migrate from rural areas to the poorest slum neighbourhoods ringing La Paz.”

In Bolivia there are 235,000 clients affiliated with the Association of Financial Entities Specialised in Microfinance.

Microcredit is essential for the development of microbusiness, a leading generator of jobs in countries like Chile, where 82 percent of all shops and other businesses belong to that category.

In Central America, 2.5 million people are self-employed or are paid employees in a total of just under 229,000 microenterprises, it was reported at the summit.

Microcredit is good business. It establishes a balance between risk and mutual responsibility among beneficiaries, and adapts well to varying cultural and geographic requirements, the experts stressed.

But the most noteworthy positive effects lie in the ability of microbanking to encourage savings among the lowest-income sectors, and to enable people to pull out of poverty.

“When I went to banks to say I needed a loan of 40,000 pesos (around 70 dollars) to open a pastry business in my home, they would laugh in my face,” Eulogia Santelices, a 38-year-old mother of four who is on her own, commented to IPS. “And when I went to the moneylenders, I was offered loans at 10 percent monthly interest – a really abusive rate.”

Today, Santelices is one of the satisfied clients of the Fondo Esperanza (Hope Fund), set up by the Hogar de Cristo (Christ’s Home), a Catholic humanitarian organisation in Chile.

The Hope Fund sets up “banks” or groups of 20 people, with each member receiving the same initial 70-dollar loan.

Ninety-eight percent of those who have received loans meet their payments on time, which gives them access to a 130-dollar credit after three months. Those who continue to be punctual and reliable in repaying their loans can work up the scale, to a 480-dollar credit.

The Hope Fund now has 25 “banks” made up of a total of 500 members, the majority of whom are women.

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