He describes himself as a "lender of hope", but Mohammed Yunus, winner of the 2006 Nobel Peace Prize, does not just offer dreams to the world's poorest people. Through his bank, the Grameen Bank, he lends them money to allow them to create their own small business. Over three million Bangladeshis have already benefited from the system and the "poor people's bank" has become a model developed in more than 100 countries.
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Micro-finance to create your own job
Micro-finance, which is meeting with growing success in many countries throughout the world, offers bank loans to very poor entrepreneurs allowing them to secure their business and build a future for their families. The Veolia Environnement Foundation supports micro-finance initiatives in India, Brazil and, very recently, in France.
Loan repayment rate of 98%
The key to its success? The Grameen Bank enjoys a loan repayment rate upward of 98%, a result that the traditional banks would be happy to own. But it is not alone in this: other micro-finance organizations also post the same positive results. In her book "On ne prête (pas) qu'aux riches" (we don't lend money just to rich people), Maria Nowak, founder of ADIE*, suggests an explanation. "These very poor borrowers know that if they pay back the first loan, they will be eligible for a second. They also show more solidarity and are keener to preserve their reputation than people of substance. After all, it's the only thing they possess."
The micro-finance system helps reduce inequalities in access to banking services. Its borrowers benefit from affordable interest rates, but, most important, it gives people at the bottom of the socio-economic ladder a chance to find gainful employment.
Micro-insurance: a useful adjunct
As part of its commitment to sustainable workforce development, the Veolia Environnement Foundation supports micro-finance actions in three countries. In India, in Pune (and in Bombay where it recently started operations), it is active alongside the non-profit organization Inter-Aide. Some 17,000 people have already received a loan, often combined with management training.
In addition, noting that 50% of repayment incidents were due to health problems, Inter-Aide is starting to offer a complementary service to the small entrepreneurs it supports: a micro-health insurance service allowing them to insure their small business activity against accidents or serious illness.
In Brazil, the Foundation supports Empreenda! (Show enterprise! in Portuguese), which has granted over 500 loans ranging from 35 to 1,600 euros to inhabitants of a Sao Paulo shanty town.
Finally, alongside these positive experiences, it has signed a partnership with ADIE, the organization set up by Maria Novak in France. As well as providing financial support, the Foundation also offers its know-how and the expertise of its employees to support creation of small businesses in disadvantaged neighborhoods.
*ADIE :Association pour le Droit à l'Initiative Économique - non-profit organization supporting the right to economic initiative
The main players in the sector
- Micro-finance institutions: typically set up at the initiative of local communities and with the support of international cooperation agencies and NGOs. They include: GRET, CIRAD and IRAM in France and ACCION, Opportunity International and FINCA in the USA. In 2004, these institutions were estimated to have 80 million customers and the global requirement was estimated at 500 million.
- Public-sector banks and national development banks.
- Commercial banks, which are becoming aware of the merits of the system and starting to offer these services in partnership with the organizations mentioned above.
The big international financial backers USAID, AFD, KFW, DFID, the World Bank, the United Nations, the European Commission, etc.
Empreenda (Brasil) : Economic development in the favelas
Inter-Aide (India) : microcredit and Training to Foster Development.
