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Intro to Microcredit

Intro to Microcredit. NYC FLOW Activation Circle July 17, 2007. What is Microcredit?. Small loans, given mainly to poor women in the developing world. Microcredit offers access to credit to those people traditional banks will not lend to because they lack collateral.

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Intro to Microcredit

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  1. Intro to Microcredit NYC FLOW Activation Circle July 17, 2007

  2. What is Microcredit? • Small loans, given mainly to poor women in the developing world. • Microcredit offers access to credit to those people traditional banks will not lend to because they lack collateral. • Microcredit is community-driven development, dependent upon the innate creativity and potential of each individual.

  3. Frequently Asked Questions • What does Microcredit do? It allows people to startand expand tiny businesses without depending on money-lenders who demand exorbitant interest rates. • How many people is microcredit reaching? As of December 31, 2003, 2,931 microcredit institutions reported reaching almost 81 million clients, 54.7 million of whom were among the poorest when they took their first loan.

  4. Frequently Asked Questions (cont.) • What does “poorest” mean? The international standard of ‘poorest’ means those people living on less than $1 a day. There are 1.2 billion such people. We also include the bottom half of those below their country’s poverty line. • How many borrowers are women? According to the 2004 Microcredit Summit Report, of the poorest clients, 82.5 percent, or 45.2 million, borrowers are women.

  5. Frequently Asked Questions (cont.) • How long has microcredit been around? It began in Bangladesh over 25 years ago. • What is a Typical Repayment Rate? Repayment rates vary from 95 to 98 percent. • What is the Microcredit Summit Campaign? The MSC is a project of the RESULTS Educational Fund and is working to reach 100 million of the world’s poorest families, especially the women of those families, with microcredit by the end of 2005.

  6. Why Target Women? • Most of the 1.2 billion people living on less than a dollar a day are women and their children. • Women are the primary caregivers for the world’s children.The poverty of women results in the physical and social underdevelopment of their children. • Experience proves that women are not only a good credit risk, they invest their income toward their children’s health care, education, nutrition and general well-being. • Women also obtain a higher social status within their homes and communities after they become entrepreneurs.

  7. SML Impact Study (Bath, Sheffield & Sussex Universities – England) 1) 76.8% of the clients experienced significant reduction in their poverty over the last four years of which; i. 38.4% moved from Very Poor to Moderate Poor ii. 17.6% moved from Very Poor to Not Poor iii. 20.8% moved from Moderate Poor to Not Poor 2) 38.4% are in the Non Poor category. 3) 80% witnessed increase in income levels. 4) Women actively participate in family decisions. 5) Most of the members’ children are being sent to schools. 6) 17 different combinations were used as paths out of poverty. Source: Vinod Khosla, MICROFINANCE: Enabling The Power of Ideas & Entrepreneurial Energy for the Other Half (Powerpoint presentation), May 2004 – data from Share Microfin LTD (India)

  8. Remove The Myths • The poorest are too costly to reach & motivate • Institutions for the poor cannot be financially self-sufficient • Such institutions will only add a debt burden to the poor Source: The State of the Microcredit Summit Campaign Report 2003

  9. Capitalism Scaled? • Virtuous Pyramid Scheme • Sustainable • “Better NOT Best Alternative” Methodology • Incentive Schemes for Workforce • Scalability: Commercial basis at ALL levels • Economic Efficiency from Darwinian Model

  10. Powers of… • Entrepreneurship • Power of Ideas • Self preservation, Survival & Betterment • Appropriate Capital • Appropriate Assistance

  11. Congruence with FLOW • FLOW is an emerging movement dedicated to liberating the entrepreneurial spirit for good and directing it towards creating sustainable peace, prosperity, and happiness for all in our lifetime. • FLOW Principles – commitment to: • Human flourishing • Non-violence, non-coercion, and peaceful, voluntary exchange • Diversity and radical tolerance Other principles core to FLOW relationships are: • Transparency and openness in communications • Respect and consideration for others • Truthfulness • Humility

  12. Expanding on the Microcredit Opportunity – Some Questions • What’s true about microcredit? • What’s uniquely true about microcredit vs. other financing or other aid approaches? • What are the benefits of microcredit across the functional to emotional range? • To the entrepreneur • To the lenders • To society • What’s microcredit like (metaphors)? • What’s the image of microcredit?

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