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Program Succeeds Using Peer Lending Approach With BC-Women’s Foundation

April 26, 1992

NEW YORK (AP) _ Usually, new ideas are tried out in the United States and exported to the Third World. But a Ms. Foundation fund is borrowing a business concept from poor nations to help needy women at home.

The fund makes low-interest loans - really lines of credit - under what’s called the ″solidarity system,″ commonly used in Third World countries as a way to spread risk.

Under the system, individuals in groups of three to five are responsible for paying back any loan on which one member defaults.

Created in 1990, when the nation was first slipping into recession, the Collaborative Fund for Women’s Economic Development divides $2.3 million from corporate and foundation sponsors among 15 independent programs.

Most of the programs lend money and other support mostly to women who want to establish or expand a small business. The goal is to give low-income women - often single mothers on welfare - some independence.

″Banks don’t always see low-income women, particularly women of color, as bankable,″ said Marsha Cantarella of Catalyst, a non-profit women’s research organization that works with companies. ″We need to facilitate their entry into the economy.″

The peer lending system is modeled after a concept developed by the Grameen Bank of Bangladesh and has met with considerable success in the Third World.

For instance, one pioneer in the solidarity concept, Accion International, has lent $61 million to more than 100,000 businesses in Latin America. The average loan is about $400; the default rate just 2 percent, said Accion’s Gabriela Romanow.

The Collaborative Fund is helping to sponsor Accion’s first urban project in the United States. Based in Brooklyn, New York Accion has 38 clients running small restaurants, grocery stores and wholesale businesses.

Other fund programs operate in Lowell, Mass.; Los Angeles; Charleston, W.Va.; Augusta, Maine; Missoula, Mont.; San Francisco; Minneapolis; New York; Pine Bluff, Ark.; Pine Ridge Reservation, S.D.; and Chicago.

″We are creating jobs where they are needed most,″ said Gloria Steinem, founding president of the Ms. Foundation, a non-profit funder of grassroots women’s organizations.

The fund has drawn praise from women’s groups and financiers.

″This is the trend for low-income women,″ said Muriel Siebert, president and founder of an investment firm that bears her name. ″There are projects like this in the Third World and there’s no reason we can’t do it here.″

End Adv for Sunday, April 26

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