- The Washington Times - Sunday, February 6, 2005

The Dec. 26 Indian Ocean tsunami is giving a boost to the microloan industry among nonprofit organizations as investors seek a means to do good with their money.

As the world’s charities turn to South Asia, microloan institutions are using money from certificates of deposit to finance part of the recovery.

The certificates are purchased by investors who earn a small return but who are trying to help others.

“Our mission is to fight poverty, not to make money,” said Terry Provance, executive director of Oikocredit USA, the Washington branch of the world’s largest microcredit institution. “All the money that’s invested in us goes to reduce poverty.”

These microloans are small business loans that average from $50 to $200 in underdeveloped countries. They are used commonly by nonprofit organizations to help poor people work their way out of poverty.

They typically pay for the purchase of sewing machines, teapots, ice-making machines or other equipment to help start small businesses.

Oikocredit oversees $390 million in cash assets that are distributed as microloans in 67 countries. About $24 million comes from U.S. investors. ShoreBank in Chicago is the main repository for the funds. Oikocredit is based in Amersfoort, Netherlands.

Individual investors can put a minimum of $1,000 into a “world partnership certificate” and earn a 2 percent return after one year. They can add to the certificates in any increment they choose.

“We also emphasize a great social and moral reward,” said Mr. Provance, an ordained minister in the United Church of Christ. “There’s another dividend that is not financial but equally important.”

Last month, a U.S. congressional delegation touring the tsunami damage recommended greater use of microloans to help rebuild the area.

In 2004, investments into Oikocredit in the United States averaged $284,000 per month, Mr. Provance said. In January, investors put $331,000 into the world partnership certificates, which Mr. Provance said resulted from “people’s reaction to the Asian tsunami.”

One of the local investors is Kathy McNeely, an associate director for the Washington-based Center of Concern, a nonprofit foundation that advocates religious doctrine in public policy.

She said she learned about the power of microcredit while she worked as a Catholic missionary in Guatemala from 1992 to 1996. In one case, five Guatemalan women joined to obtain a microloan to buy a cow, which they used to make and sell cheese and milk.

“They were able to live off that and provide better food for their families once they had that income,” Miss McNeely said.

In addition, she considers the 2 percent annual return she earns on her $1,000 certificate as a sound investment, she said.

In the Washington area, banks are offering one-year certificates of deposit with returns of about 2.5 percent to 2.7 percent.

Oikocredit has been making the microloans since 1975 and incorporated as a nonprofit for its U.S. operations in Illinois in 1980.

Its largest individual investor is a retired Boston woman who invested $148,000. The largest institutional investor is the Presbyterian Church, which invested $3.4 million.

Last week, the National Capital Presbytery, the governing body for 112 Presbyterian churches in the Washington area, invested $10,000 in Oikocredit certificates.

Church leaders decided to make the investment for “just the satisfaction of knowing that the money we invested there is helping folks to improve their lives,” said Currie Burris, the National Capital Presbytery’s mission committee chairman.

Chris Crane, chief executive officer of Opportunity International, a Chicago microcredit institution, said reasonably priced loans would not be available otherwise to many poor people in countries such as India and the Philippines.

“Loan sharks typically charge 500 percent to 1,000 percent [interest] annually to small borrowers,” Mr. Crane said.

Reputable microcredit institutions charge from 3 percent to 9 percent interest, depending on the local economy and credit history of the borrower.

Opportunity International uses a $118 million portfolio to make microloans worldwide.

The United Nations has organized an initiative, the International Year of Microcredit 2005, to increase microlending.

Since Grameen Bank of Bangladesh started making microloans in 1977, the loanshave grown to a worldwide movement.

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