Small loans with big results

With $50, Americans can buy a tank of gas, go out for a nice dinner or buy a few bags of groceries.

With $50, a woman in El Salvador became an independent business owner after she purchased chickens, raised and sold them, bought pigs and built two small houses that she now rents out to people in her community.

This transformation was made possible by the Women’s Microfinance Collaborative, whose members gathered last Thursday evening (Sept. 28) at the Chico Women’s Club not only to celebrate the establishment of its first bank, but also to discuss the experiences that inspired them to help women living in poverty.

“For years and years we’ve had that dream—for women in Chico to have a vehicle to provide to Third World countries,” said Katy Warren, co-founder of the collaborative and member of Soroptomists International. Microfinancing is that vehicle.

Developed in the mid-1970s by Bangladeshi banker and economist Muhammad Yunus, microfinancing is the lending of small amounts of capital directly to individuals in Third World countries, 79 percent of whom are women, said Dave Gallo, Chico State professor of economics, who spoke at the event.

The loans are used by poor entrepreneurs who are taught how to invest the money by building and establishing their own businesses. Loans must be paid back in six months or less, and the payback rate is high, 95 percent, Gallo said.

Microfinancing has proven in many ways to be more successful than the kind of large-scale financing provided by such groups as the World Bank and the International Monetary Fund. The money goes directly to individuals, avoiding the corruption and waste that so often accompanies macrofinancing.

The Women’s Microfinance Collaborative is providing small loans to citizens of El Salvador, and the money has already made a huge difference in the quality of life for some families.

Many women buy and raise livestock; others buy products to help them make and sell tortillas. Either way, the money is used to help these women provide basic necessities for their children, like clothing, as well as education they might not otherwise be able to afford.

Katy Warren’s interest in helping people in poor countries began after she visited Africa and saw firsthand the horrific poverty and even starvation that some people, including children, were facing.

The experience changed her life. “That started a passion in my heart and a flame that has never and will never go out,” she said.

That passion grew after she saw a PBS documentary on microfinancing titled Small Fortunes. Warren became inspired to form the collaborative and found a partner in Rosemary Quinn, president of the Chico Women’s Club.

They had a founding lunch, and a representative from the League of Women Voters showed up. A little more than six months and $2,500 in donations later, they established their first bank.

The collaborative, which is made up of members from the American Association of University Women, the League of Women Voters, Chico Women’s Business Association, the Soroptomists International and the Chico Women’s Club, has been such a success that the organization hopes to open a total of four banks this year, providing loans to people all over the world.

Donations are made to Help International, which processes the checks and wires the funds directly to OEF, a nongovernmental organization based in El Salvador. OEF then establishes the micro credit bank and provides loans to borrowers.

The collaborative receives a profile of the person who receives its loan, detailing who the person is, how much he or she received, what the loan was used for and how the loan helped.

Microfinancing is becoming increasingly popular, and the U.N. named 2005 “the international year of micro credit.” Bill and Melinda Gates are strong supporters, as is Bill Clinton, whose nonpartisan Clinton Global Initiative has provided $75 million to microfinance institutions around the world.

While $75 million is too lofty a goal for the Women’s Microfinance Collaborative, it got off to a good start for its second bank by raising more than $500 by the night’s end.

Sometimes, a little money goes a long way.

The Women’s Microfinance Collaborative will hold its next meeting, open to the public, at 5:30 p.m. Oct. 17, at Star Credit Union on Salem Street.