Enabling Access to Capital
	Introduction Goals & Objectives Resources Contact
	Throughout developing economies there are surpluses of people who seek to pull themselves up by their own bootstraps. For those lacking even "bootstraps," microfinance institutions can make all the difference. A microfinance institution (MFI) is an organization that provides financial services targeted to the poor. Find out more about how these microloans are helping the world's poorest here.
	Issues / Working Groups Access to Health Care Contract Supplier System Corporate Governance Enabling Access to Capital Environmental Justice Global Warming Promoting Human Rights Violence & Militarization of Society Water & Food Resources Access to Health Care Contract Supplier System Corporate Governance Enabling Access to Capital Environmental Justice Global Warming Promoting Human Rights Violence & Militarization of Society Water & Food

"I firmly believe that we can create a poverty free world if we collectively believe in it. The only place you would be able to see poverty is in a poverty museum."

- Muhammad Yunus accepting the Nobel Peace Prize for helping people rise from poverty by giving them small, usually unsecured loans.

Donate to ICCR now

Microfinance: Finding New Solutions to World Poverty

A microfinance institution (MFI) is an organization that provides financial services targeted to the poor. While every MFI is different, all share the common characteristic of providing financial services to a clientele poorer and more vulnerable than a traditional bank client. Instead of preying upon the desperate need for cash and credit of the world's impoverished, microfinance seeks to provide an opportunity to "develop from below" so that they can build assets, increase incomes, and reduce their vulnerability to economic stress. In doing so, hard-working but disadvantaged people are able to stand on their own, reducing reliance on charitable means and finding independence through productivity.

And - as is more often the case then many realize - doing the right thing is also good business. The average repayment rate on a microcredit loan is 97%. Microfinance portfolios as a whole perform consistently well with the average return on equity is 39% with average yield at 38%.

The following table illustrates how microfinance is an effective and sustainable strategy to drastically reduce global poverty.

Equal Opportunity From The Bottom-Up: For The Sake Of The Bottom-Line
One of the auxiliary benefits of microfinance is the positive impact it has on the status of women worldwide.
Corazon Endonela lives in Makati, Philippines, with her husband and three children. The road to her home winds past streams of raw sewage. Factory work left her unable to support her large family. She wanted to go into business for herself, manufacturing and selling her own slippers with help from neighbors and family members.
While Endonela had persistence, creativity, initiative and business sense - she had no start-up capital. Traditional banks would have considered her unreliable because of her lack of sufficient collateral. Loan sharks would have lent her money, but at steep interest rates.

Endonela received a microloan of just under $100 from a local microfinance institution, which enabled her to buy a sewing machine in order to start a self-sufficient slipper business and generate a decent income.

Women have become the focus of many microcredit institutions and agencies worldwide. The reasoning behind this is that loans to women tend more often to benefit the whole family than do loans to men. Giving women control and responsibility for small loans raises their socio-economic status.

ICCR's Enabling Access to Capital Working Group
ICCR Members have for some time now advocated for banks' responsible engagement in the microfinance sector, and continue to invest their own resources. Responding to the changing microfinance landscape, in the past two years we've met with Deutsche Bank, S&P, Fitch, Citibank, ABN Ambro, Bank of America, and JPMorganChase to encourage them to play a larger role in microfinance or to ensure that their entry into the microfinance market has a positive impact on the industry and the ultimate borrowers. It is a major focus of the Working Group.
ICCR members have also increased their financial commitment to microfinance; three ICCR members even joined the Global Commercial Microfinance Consortium, a $75 million fund structured by Deutsche Bank. ICCR affiliate TIAA-CREF, meanwhile, announced a $100 million commitment to microfinance.

Some of the priorities ICCR members have used in their discussions with commercial banks are as follows:

• Articulate the moral, social, and financial reasons why banks should get involved in microfinance.
• Help banks see microfinance as something more than philanthropy, and see the links between microfinancing and the banks' sustainability commitments (as more banks sign on to the concept of sustainability).
• Identify unmet opportunities and underserved sectors and regions through religious and NGO sector contacts.
• Facilitate connections between banks and MFIs.
• Make microfinancing activity a more explicit benchmark when measuring banks' social performance (the Principles for Global Corporate Responsibility mentions microfinance in benchmark 2.5.B.4).

Commercial banks should listen - indeed they have a strong self-interest in making it happen. In many regions of the world the population density, and thus the market potential, is so high that economies of scale can be reached even when working with small transfers, enabling desired profit.

Oikocredit and ICCR
One-half of the world's people live on $2 or less each day, one-fifth on less than $1. The loan to Corazon Endonela enabled her to feed her children two meals each day instead of one, go to the doctor's office, buy clothes and books so that her kids could go to school and certainly helped to enhance her self-esteem. The institution which provided Endonela her life-altering loan, Tulay Sa Pag-unlad Inc, was able to provide these funds because of money it received in part from churches and individuals in the United States. That money came through Oikocredit.
Oikocredit is a long-time friend of ICCR, and was founded by the World Council of Churches in 1975 and is supported by numerous religious organizations in the US, including many ICCR members. Today it is the largest international private provider of microcredit in the world. Its mission is to support economic justice by inviting churches and persons of wealth in the United States to share their resources through socially responsible investments.

In thirty years all individual and institutional investors in Oikocredit have received annual interest plus full principal upon redemption. Not one investor has lost even a dollar because the poor, empowered with credit often for the first time, improve their lives and pay their debts.Oikocredit has total available capital of $292,000,000 of which $250,000,000 is committed to project funding. Oikocredit provides long term loans to cooperatives and microcredit banks around the world. And over 35 Fair Trade cooperatives in Asia, Africa and Latin America received Oikocredit loans. Chances are that if you drink Fair Trade coffee today, it came from a cooperative which has received financial support from Oikocredit.

Oikocredit aims to be a bridge between the rich and the poor, between people with and people in need of financial resources. Our way of building bridges is to provide credit. And since its establishment, Oikocredit has successfully supported hundreds of thousands of people around the globe in their efforts to make a living and thereby gain control of their own lives.

Just some of ICCR members who are also Oikocredit institutional members:

• Adrian Dominican Sisters
• American Baptist Home Mission Society
• Catholic Foreign Mission Society of America
• Church of the Brethren
• Disciples of Christ
• Evangelical Lutheran Church in America
• Franciscan Friars, Holy Name Province
• General Board of Global Ministries, UMC
• Presbyterian Church (USA) Foundation
• Reformed Church in America
• Sisters of the Sorrowful Mother
• World Council of Churches -USA

Other Resources

Rarely has ICCR's Corporate Examiner covered an issue in more depth, or with such frequency, as it has microfinance. The following issues address microfinance and related issues:

A Dialogue for Development in Microfinance (Corporate Examiner, Vol.34 No.10)
Banking at the Bottom of the Economic Pyramid: Separating to Survive (Corporate Examiner, Vol.34 No. 2)
The Power of Microcredit (Corporate Examiner, Vol.33 No. 10)

These issues are available for purchase here.

What YOU can do

• Learn about microfinance and its impact on world poverty.
• Invest in microfinance.
• Purchase products made by micro-entrepreneurs.
  

For more information about Oikocredit and Oikocredit Sunday, please contact:

Oikocredit USA
PO Box 11000
Washington, DC 20008
(e-mail) usa.sa@oikocredit.org