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Micro-Finance

Class Break-DownI. Micro-FinanceII. Micro-CreditIII. Global Agents for ChangeIV. Business Scenario V. In-Class Blogging

Why Micro-finance?

According to the UNDP Human Development Report (HDR) 2005 only 9 countries (4% of the worlds population) have reduced the wealth gap between rich and poor, whilst 80% of the worlds population have recorded an increase in wealth inequality.

The 2.5 billion people living on less than $2 a day 40% of the worlds population receive only 5% of global income, while 54% of global income goes to the richest 10% of the worlds population.'

The HDR 2005 cites the unjust global trade regime as a primary cause in increasing global inequality.

According to the International Forum on Globalization, 52 of the top 100 wealthiest economic entities are corporations as opposed to countries.

Common Types of Micro-Finance

1) Member-Owned Organizations

2) NGOs Solidarity Lending, Village Banking

3) Formal Financial Institutions

4) Informal Financial Service Providers Moneyguards, savings collectors, pawnbrokers

How it Works

Solidarity lending is based on groups borrowing collectively and encouraging one another to repay.

Avoids fixed cost by bundling

A business model is established

Banker comes to villages/borrowers

Repayment schedule is determined by business plan (usually 6-12 months)

Defaults are handled by village leader of eight solidarity groups

How it Works Part II

A lender is found outside of the community

Loans are established through peer-to-peer lendingKiva and business profilesNot charity, it's about fair access

100% delivered to borrowers

Repayment rate

Vancity and subsidies & less social capital culture

Field partner evaluates business plans in context of community resources, environmental impacts

A profile is created on the Kiva website

http://www.youtube.com/watch?v=Vf9ioT4iKcM

Success Story

Sam Daley-Harris, Microcredit Summit Campaign Director

"Several years ago two friends of mine were speaking with a group of 40 clients at a micro-bank in South Asia. Impact the bank had had on the husbands of then on-borrowers; not their husbands, but the husbands of women who are not with the bank. The clients said, 'Before we took our loans, our husbands were day-labourers, working for others whenever they could find work. When we took our loans our husbands stopped being day-labourers and worked with us - bicycle rickshaw, husking rice, growing garlic on leased land. This caused a shortage of day-labourers in this area, so the husbands of the non-borrowers who were day-laborers-their wages went up.' That was the impact of this bank on the husbands of the non-borrowers."

Caveats of Micro-Credit

Saving-up vs. saving down

Where does the money come from?

Interest rates can be as high as loan sharks

High risk

Informal market and labor

Empirical data

Nothing without education

It's only a loan

What are they buying with the money?

Is there a bigger problem?

A Real Life Loaner

Mr. Lucilo Nicols Calero is 47 years old

Lives in Ticuantep, Nicaragua

He and his wife work a business together. They have three children, all old enough to be on their own.

They plan to open a welding shop that one of their sons

Mr. Lucilo has been farming for the past 30 years.

His biggest setback was not having been able to discharge his loan in time because he fell behind in production a bit, due to lack of raw materials needed for a good harvest.

With this sixth loan, he will buy fertilizer and raw materials to apply to his crops.

And the Plot Thickens

In mid 2008, Movimiento No Pago

supported mostly by farmers with ties to the left-wing party in Nicaragua, has been organizing protests (some violent) and forcing microfinance institution branches to close.

Fed by the global the economic crisis

This group has submitted a law to the government to create a moratorium on debt repayment.

If passed, the law could have a crippling effect on the microfinance industry and banking sector in Nicaragua.

Kiva, along with 25 other funders from 9 countries, has signed onto a letter to the Nicaraguan government urging a resolution to this situation without enacting a moratorium on debt repayment.

For more information, please see the following article: http://impreso.elnuevodiario.com.ni/2009/09/24/nacionales/11023

Riding to Break the Cycle: Annual routes across Europe and North America have raised over $200,000 and engaged thousands of people.

Education Generation: Beta launched in fall 2008, this program already has funded 130 scholarships and raised over $30,000.

Young Agents for Change: Funding and ongoing mentorship for young BC social entrepreneurs (12-20)

The Microcredit Challenge: Campus game

Bike Rides!

Cambodia TripInaugural year

13 days, 650 km, departs December 28, 2009

$500 minimum fundraising goal

Europe RouteAmsterdam to Istanbul (9 weeks, 4000 km, June 19 2010

$1500 trip fee, $3000 fundraising goal

West Coast TourVancouver to Tijuana - 3000km, 6 weeks, May 24, 2010

$1200 trip fee, minimum $3000 fundraising goal

Looking for Sag-wagon drivers too!

Does it make a difference?

As far as curing poverty, the solution is multi-faceted

Perhaps there are bigger fish to fry capitalism

But as far as global issues, poverty is the most pressing as environmental issues compound the poor will be marginalized first

This is the most effective and practical way of solving this major global problem to which there is no answer yet

But as to whether or not we're chaning anything, at least we're changing ourselves and having fun

Possible Blog Headings

Why Micro-finance Will Change the World

Alternative Solutions to Global Inequity

Why Micro-credit Rocks

Why Micro-credit is Overrated

How to Keep Grassroots Organizations Grassroots

How Micro-credit and the Environmental Movement are related

Open to ideas!