Little loans help pull women out of poverty

from Yahoo News via the San Diego Daily Transcript

Olga Castro was a single mom recovering from a car accident when she learned she had breast cancer.

Without a job or medical insurance, and with the responsibility of raising a teenage daughter, she turned to working with beads as a hobby.

In her dire financial state, Castro turned her pastime into profit, with the help of a micro loan from the Foundation for Women.

"I joined the (Foundation for Women) group and I have been receiving loans since then. The first loan I received I used it to purchase beads and raw material," said Castro.

The foundation has been creating microcredit programs globally for the past 10 years and started a program in San Diego in 2004, in a partnership with the Alliance for African Assistance.

Loans are available to women, many of who are refugees or immigrants, who live below the poverty line.

"Women are really creative," said Deborah Lindholm, executive director of the Foundation for Women. "They're used to getting up in the morning and figuring out how to make money, or else they're not going to eat."

The programs work on the Grameen methodology, a system developed by economist Mohammad Yunis.

Yunis developed the methodology in his native Bangladesh, where he observed artisans kept in poverty by predatory moneylenders.

He paid a group of basket weavers $26 each to pay off their debt and buy materials. Yunis created the "grameen," or village methodology, a way of providing loans to people who could not sign their name, let alone sign off for a bank loan.

Since then, microloans have provided $6 billion to small business owners living below the poverty line, with a 98 percent repayment rate, said Lindholm.

Participants of the San Diego program hear about the program through word of mouth, or from Susana Garcia, microcredit program director, who goes into low-income communities to educate women on the program.

Loans are given to groups of five women in denominations of $250, $500 and $1,000.

"Once the group agrees (on the details of the loan), the loan is given, no questions asked," Lindholm said.

For 25 weeks, the group must meet and return a portion of its loan to the foundation. For a $250 loan, the group must pay $10 in repayment, $1 in interest. and $5 for savings and reinvestment. Meetings are a time for the groups to develop business plans and discuss marketing strategies, but also to talk about health, childcare and family planning.

Garcia, who directs the micro-credit program for the foundation, said the meetings are organized to provide lenders with both financial and community skill.

Women learn about business plans, marketing, creating financial statements, and applying for licenses and permits, but also create an environment to boost self-esteem and stimulate peer bonding.

Businesses primarily revolve around food service, but also including hair braiding, jewelry making, clothing, house cleaning and other professions.

So far, the repayment rate has been 100 percent for 100 women. The foundation hopes to reach 100 more women by the end of the year.

"This is their first access to financial services," Lindholm said. "Our goal in San Diego is to get them on the first rung of the economic ladder."

The foundation receives its foundation for the microcredit program and other programs through its membership, grants and one-time donations. Five hundred members donate $50 or more every year, with 2,000 donors nationwide.

Worldwide, the micro-credit movement is specifically geared to women. Because women are mothers and the primary caregivers in a family, they are reportedly more likely to use the loan in a way that will be most beneficial to her family.

"Women are mothers and desperately poor people who, when having access to a loan, will do everything in their power to repay it," Lindholm said. "There's nothing they won't do to make sure their children have a different experience than their own."