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Small loans that help poor start businesses to be focus of conference

January 28, 1997

WASHINGTON (AP) _ They live in El Salvador, Kenya and inner city Chicago. Each received a small loan to set up a business. Two opened up food stands, the third a shoe store.

The loans often amount to no more than a few hundred dollars. But by offering them, international lending agencies, private banks, corporations and foundations have created a powerful tool to help people rise out of poverty.

The principle is called ``microcredit,″ part of a hot trend in economic development.

Its advocates believe it should be better known so it can reach more poor people. They have organized a two-day meeting in Washington starting Sunday that is expected to draw 2,500 people.

Hillary Rodham Clinton, Queen Sophia of Spain, two African presidents, an Asian prime minister and the heads of eight development agencies are expected to address the sessions.

Organizers hope that President Clinton, who began boosting microcredit in 1992 and mentioned it while campaigning last fall, will make an appearance.

Beneficiaries include people like Francisco Rojas of El Salvardo, who used $50 loans to buy noodles and spices to sell in a market; Judy Taylor from Chicago, who borrowed $600 and eventually opened her own shoe store; and Mary Akroth of Kenya, who started a roadside food stall.

``I can spend almost twice as much for food, live in a nicer home, buy medicines and save money″ said Rojas. ``I feel safer now. I sleep calmly at night because I am not worried about how to pay back money lenders.″

Groups sponsoring the meeting have drawn up a plan that calls for $21.6 billion to be advanced to nearly 100 million poor people over the next eight years _ an average of $216 each. At present the program reaches an estimated 8 million people.

Major international aid agencies, banks, corporations and foundations support the idea.

``I am personally, absolutely and totally committed to this activity,″ said World Bank President James D. Wolfensohn. ``I can see the importance particularly for women.″ Working with other donor organizations the bank plans to invest $200 million in the idea.

``The time has come to acknowledge publicly and on a global scale what hundreds of microcredit programs around the world have already shown: microcredit is a key tool in the struggle to end poverty,″ said Sam Daley-Harris, president of the Results Education Forum, a Washington advocacy group that organized the meeting. Results mobilizes support to fight hunger and poverty.

While advocates from organizations that make microcredit loans ardently promote the idea, other development specialists say it is only part of the solution to help the world’s poor.

Other factors, particularly in the developing countries, are economic development, spending on education and good government.

In addition, the specialists say microcredit, which got its start in Bangladesh 20 years ago, needs to be better evaluated to see how effective it is over the long term.

Clinton sees an application for the United States.

``Microenterprise loans have helped to revolutionize the culture of poverty in countries far poorer than America all over the world,″ Clinton said in speech last October.

``Why couldn’t we revolutionize the culture of poverty in our inner cities and other isolated areas with (such) loans in America to bring free enterprise? Women can lead the way in this.″

Mrs. Clinton, who has seen these programs in action in Bolivia and Bangladesh, says, ``They work. They lift women and families out of poverty. It’s called micro but its impact is macro.″

Attending the Washington meeting will be Mohammed Yunes, who got the movement started in Bangladesh in 1996 when he lent $27 from his own pocket to a woman who made bamboo furniture.

With the loan, she was able to break free of a supplier who determined what she made and what it sold for to increase her profits from 2 cents a day to $1.25.

With this experience, Yunes founded Grameen Bank, which today has 2.1 million borrowers in 36,000 villages, most of whom are women. Other groups that followed include the Women’ World Banking; The Foundation for International Community Assistance, which makes loans in Peru; Kyrgyszstan and the United States; and Accion, which is active in Latin America.

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