Most of us think of loans in the thousands of dollars, paying for things like a car, home, or university education.
Microcredit or microfinance, as the names suggests, is a concept where very small loans are granted to entrepreneurs who have good business ideas, but no assets or credit history to qualify for a traditional loan.
Microcredit captured a lot of attention recently when Muhammad Yunus and the Grameen Bank won the 2006 Nobel Peace Prize. Yunus and the bank he founded have helped millions of Bangladeshis escape poverty by financing their small businesses.
World Vision and Microfinance
World Vision shares Yunus' conviction that lending small amounts of money to the poor can be a powerful tool in the fight against poverty.
"Microfinance empowers the poor to improve their lives sustainably," says Chris Shore, Director of World Vision's Microenterprise Development Group. The idea is also in-line with World Vision's core values. "[Microfinance is] a profoundly biblical concept," says Shore.
Since 1993, World Vision has lent more than $788 million in microfinance loans to two million clients. Budding entrepreneurs have started small carpentry shops, purchased livestock, and run food services.
Today, World Vision's VisionFund lends in 47 different countries. Most loans are between $100 and $2,000, the majority going to women since they're more likely to reinvest into the home.
To help ensure success, credit officers coach clients in accounting, marketing, and managing their small businesses throughout the term of the loan. Last year more than 98% of loans were repaid. These payments are recycled back into the system to help new entrepreneurs.
Work Ethic as Collateral
For four years, a young Cambodian named Theang Phally woke up before dawn each day to pedal her bicycle five kilometres to the nearest market. In the morning twilight she chose the best fruits and vegetables and then travelled back to her village to resell the produce.
Theang's hard work put dinner on the table for her family, but it also made her eligible for microcredit through VisionFund. World Vision accepted her work ethic as collateral, lending her enough to open a grocery shop and eventually buy a motorcycle. Now she's providing food for her village and valuable income for her family.
Theang says she hopes to continue expanding the family business. She dreams of a day that everyone in her family will have work, including her youngest sister Phalla, who never had a chance to go to school.
