Aussies to help break Indian poverty

from Yahoo News

About one million small business owners in India will be given a financial leg-up with microfinance provided by social investment company, Opportunity International Australia.

The microfinance provider targets poverty alleviation using a commercial approach.

It has raised about $30 million from Australian donors in the last 12 months, with the money to be used to supply financial loans and business services to budding entrepreneurs across India to help break the poverty cycle.

Opportunity Australia is aiming to fund five million entrepreneurs in India over the next five years.

"With this initial tranche of money leveraged at a rate of up to six times by debt funding from the major Indian banks, we will be able to reach one million small business owners," Opportunity Australia chief executive Paul Peters said.

Mr Peters said the company operated as commercially as a not-for-profit organisation could.

"We use all business, capitalistic approaches to fixing some labour and social problems," he said.

"Our difference to an aid, and sort of development company is that really commercial, business and entrepreneurial approach to the problem of poverty, rather than handing out money and sort of being there year after year solving the same problem.

Applicants need no collateral and only require two criteria - a productive enterprise and trust.

A productive enterprise could be "a bicycle that can start as a transport or motorcycle or a sewing machine", Mr Peters said.

"The collateral is actually the trust that one person says: this is a good person I am working with, probably that's been the jewel of microfinance."

Defaults on loans are low despite the lack of security.

"We have about $400 million outstanding and we will probably get 98 per cent of the money back."

Microfinance works where the country has some stability, Mr Peters said.

"If a government's intervention is so significant in the market, we avoid those places if there is a tremendous risk."

Opportunity International has provided microfinance in developing countries for 35 years, with about a million clients in 28 countries.

Two-thirds of those countries are in Asia, with the Australian arm involved with Indonesia, the Philippines and India, Mr Peters said.

The common businesses generally have loans between $100-$200 that turnover goods weekly.

"You'll get trading businesses that need a little work in working capital to buy and set up a little shop."

Mr Peters, who hails from Canada, became chief executive of Opportunity International in Australia four years ago, after a 10 year stint in the corporate world of mergers and acquisitions.

He changed careers to do something completely different, or "really left field", he said.

"It was the best decision I have ever made," Mr Peters said.

His wife's "passion for world" rubbed off him after she had worked with the United Nations in Nairobi.

"I had to find a new challenge that was significant."