Sokom Son, 28, resident of a rundown neighborhood in Phnom Penh, Cambodia, looks forward to the time each week when she can make a loan payment. Sokom, like other mothers affiliated with the Mothers Bank I of Phnom Penh, is not a masochist. Rather, she is part of a trend-setting effort by relief-and-development agencies worldwide to provide small loans to hard-working poor people with good ideas but no capital and no credit history—people shut out of traditional loan programs.
The Mothers Bank members, says Sokom, enjoy their weekly meetings because the Christian facilitators who organized the bank instruct the women in nutrition and health-related issues. Sokom says it was at one of these meetings that she learned how to treat diarrhea with a simple solution of clean water, sugar, and salt. That knowledge has revolutionized the health of her four children. As the bank meetings end, the women often engage in spiritual discussions, sparked by the facilitators. As a result, several women have turned over their lives and businesses to Jesus Christ.
The Mothers Bank I is one of six established in Cambodia by Carol Stream, Illinois-based World Relief, which recruited local Christian women and trained them as facilitators. They, in turn, went into poor neighborhoods and explained the loan-bank concept to women like Sokom. After a short training period, the 40 mothers received a total of $1,500. Several borrowed money to purchase pushcarts for neighborhood fruit and vegetable stands. Another bought a 55-gallon drum and outfitted it with wheels so she could sell drinking water in neighborhoods without running water. Sokom, the group’s president, used an initial $25 loan and a subsequent $37 loan—both requiring repayment in four months—to motorbike to an outlying province to purchase rice. She then resold the rice, at a profit, in Phnom Penh.
A war against chronic poverty
Loan bank concepts, often called microeconomic enterprise (MEE), are an increasingly popular way to help the world’s poor battle chronic poverty. As situations like those in Somalia, Bosnia, and elsewhere grab headlines, microeconomic programs are quietly transforming entire communities by helping motivated people become self-sufficient. Says World Vision president Bob Seiple, “Unless we can provide economic development, or labor-force enhancement, in most cases we will never break the cycle of poverty.”
Recipients pay back more than 95 percent of microeconomic loans from agencies such as Opportunity International, World Relief, World Vision, the Adventist Development and Relief Association, and Food for the Hungry. And since funds recycle when loans are repaid, donor contributions bear fruit many times over.
Most important, proponents say, MEE energizes indigenous churches. “If you ask Christian leaders in the Third World what barriers exist to church growth, they will say two things: lack of leadership and lack of resources,” says Eric Thurman, president of Opportunity International of Oak Brook, Illinois. Small-scale loans empower the church in at least three ways, says Thurman, whose organization has been committed solely to MEE for the past 22 years. First, loan programs allow community members to start businesses. As Christians succeed, they are more likely to increase support of their churches. Second, a pastor may receive a loan to open a small business next door to the church, making him more accessible to his congregation and less likely to be a financial burden. Third, local Christians are trained as loan facilitators and often receive other training in health, nutrition, or marketing. Ultimately, these skills assist not only the microeconomic effort, but outreach efforts of churches throughout that country. Seiple notes that with MEE, “You empower the church by empowering individuals in the church.”
The shape of help
While the emphasis of each agency’s program is slightly different, they share six common features:
• All make loans based on the merit of the idea. “We go to the poorest of the poor with the message of empowerment because they can get credit if they have a good idea and a sound business plan,” notes Thurman. “This is character-based lending.” Loans are made to people of all religious beliefs.
World Relief targets mothers with children under five for its bank programs. World Vision encourages otherwise unqualified applicants to form a Solidarity Group, in which each member of the group acts as a guarantee for the others. In Bogota, Colombia, for instance, Mario Ferra and Carlos Sanchez struggled to eke out a living making about 10 pairs of shoes per week. The local loan committee suggested they combine forces, making it easier for them to purchase raw materials and to guarantee each other’s loan. Now the men’s business produces some 300 pairs of shoes monthly and employs four other people.
• All MEE programs charge market interest rates, slightly less than bank rates and well below loan-shark rates. The loan terms are short—usually repayable within a few months, leading to the possibility of a larger loan. Recipients must put a set percentage of profits, usually 1 or 2 percent, into a savings account. Loan amounts vary from $25 to several hundred dollars. Opportunity International says that in 1992 its average loan was $412, creating some 64,000 jobs through 13,634 loans. By contrast, the organization says, in some sectors of the American economy it costs $40,000 to create a job.
• All use incentives to encourage repayment. Notes Ken Graber, microenterprise coordinator for World Relief, “Built-in incentives for loan repayment and savings include the promise of more and larger loans, peer pressure for loan repayment, and the sense of ownership in the program.”
• All are designed so the funds loaned are recycled to assist others. In its 1992 report, for instance, Opportunity International says it raised $3 million, but that nearly $8 million more was in circulation in Third World communities in the form of recycled loan funds previously donated.
• All provide loan recipients with ongoing encouragement and training. Sokha Eim is typical of those serving in this ministry of loan promoter. Her pastor recommended her to World Relief because he felt she possessed strong leadership qualities. She also knew firsthand the tragedy of losing a child to measles, which could have been prevented had her daughter been vaccinated. Thus she is a rigorous promoter of preventive health, a counselor to loan recipients, and—when appropriate—an evangelist engaging the women in discussions about Jesus Christ. “Our job is to help the women, but also to tell them about the gospel,” Sokha says.
• Finally, all programs are locally administered to avoid the appearance of interference from outside the community. The international agencies provide start-up capital and training but are otherwise invisible.
Beyond tradition
MEE proponents say their methodology differs from more established approaches to helping communities battle poverty. In traditional modes—sometimes called community development, family-to-family assistance, or even child sponsorship—outside agencies supply communities with funds or materials and technical expertise. The agency also encourages the outreach of the local church by providing Bibles, training materials, or subsidies for church construction. If all goes as planned, the agency eases back on funding after three to five years, leaving behind a community with an improved economic and spiritual foundation.
But MEE’s proponents say traditional development faces two challenges. First, after the agreed-upon program has ended, the community may still face roadblocks to growth from lack of capital. World Relief’s Graber said his agency began microeconomic projects in Honduras at the insistence of mothers who had recently completed agency-supported “Child Survival” projects. “The mothers said if they didn’t get some money, what was the use in learning about health,” Graber recalls. Thus, most of that agency’s microeconomic enterprise efforts in Latin America and Asia are targeted to assist women with children under five.
The second challenge to traditional development is that even though it works in partnership with local communities and requires them to contribute their own funds and effort, it still has the potential to create dependency. Thurman quickly points out that he is not out to do away with other approaches to helping people overcome poverty. “But if we are doing Christian development, in the best sense of the word, then we must ask if what we are doing to help is self-perpetuating.”
What a loan can do
Opportunity International enters an area and starts from scratch, communicating the idea of microeconomic enterprise to people who are not wedded to traditional Christian development approaches. Local boards of directors are formed, consisting of Christian entrepreneurs and a few pastors. This new agency then recruits and trains loan facilitators. To date, Opportunity has created 33 partner agencies in 17 countries. “What we do is foster an absolutely radical commitment to indigenous leadership,” Thurman notes. The agency’s work continues to expand, with the most recent new work opening in Bulgaria.
The Limits Of Enterprise
To be a Christian is to have your heart tugged by the poverty in developing countries. Microenterprise lending is appealing because it offers a practical, effective answer to the anguished question: “What can I do?” But microenterprise lending, while vitally important, is not the whole answer.
Sometimes it is difficult to promote development. Many countries’ own flawed policies pose problems we cannot easily influence. Not all “developing” nations face the same problems. Some are doing well by any standard. Others are not developing at all, as measured by reduction in poverty or illiteracy. Some countries, such as Korea and Taiwan, have grown successfully over the past three decades and now have high average incomes. Their health standards, life expectancies, and high-school educational attainments are only slightly below those of the U.S. Yet their social-service networks are inadequate, and environmental protection sags low on their agendas. Microenterprise lending is not a priority for these countries.
In populous South Asia—India, Bangladesh, and Pakistan—there is less outright starvation than 30 years ago. Yet high rates of absolute poverty persist. Land and tenancy reform are essential to ameliorate rural life; small-scale farmers desperately need credit reform. Small loans for agricultural improvements can have an especially high payoff here. Without them, credit is unavailable—or available only at mind-boggling interest rates.
But South Asia has other problems. Government controls on industry create delays and horrendous bureaucratic bottlenecks. If employment is to grow, such rules must be lifted. South Asian governments have yet to muster the will to implement reform thoroughly or permanently (although India is now attempting reform).
Areas along the Sahara—Niger, Chad, and the Sudan—are, incredibly, worse off than South Asia. Their grinding poverty, like that of Ethiopia and Somalia, is due in large part to civil war and drought. Farther south, Kenya and the Ivory Coast have two of the world’s fastest-growing populations—and fast-growing urban slums to prove it. Many states, whether nominally “capitalist” or leftist, are corrupt and authoritarian, vastly abusing government power.
Latin America, despite being relatively well-off compared to the rest of the developing world, faces its own fiendish problems. Brazil’s and Argentina’s governments have disrupted economic life with massive inflation. Vast state ownership and control of industry slow their economies, and thorny problems are posed in figuring out how best to “privatize.”
Yet huge strides some countries have made over the past several decades are grounds for optimism. Taiwan and Korea are good examples; so are Thailand and Malaysia. Their experience suggests that development can occur if domestic economic policies are sound and external circumstances are favorable.
In many ways, the world’s ideological climate is changing. As the former Soviet bloc largely abandoned socialism, many developing world governments became disillusioned with extensive economic manipulation. Their market-oriented reforms are essential for microlending to generate permanent development. The day-to-day work of churches and development organizations is easier when a country is open to private initiative. In its evangelization and teaching, the church should call people to honest and responsible use of the economic freedom markets allow.
By Stephen L. S. Smith, associate professor of economics and business at Gordon College, Wenham, Massachusetts.
A World Vision experience in Colombia lends some credence to claims by Thurman that the best way to begin is to start from scratch. According to Craig Hammon, former vice president of World Vision, when staff steeped in traditional development attempted to manage both community development-based sponsorship and microeconomic programs, the repayment of loans was abysmal. Kirk Burbank, a microenterprise professor at Eastern College, notes, “Where people smell a softness, an approach of continued forgiveness, you have higher defaults.” In Colombia, World Vision has established a separate microeconomic program headed by Steve Callison, a graduate of the Eastern College MBA program in Third World development. Part of the strategy is to establish Revolving Loan Funds in areas where sponsorship projects already exist, making loans available to qualified parents of sponsored children as well as to others in the community. The separation of management of the sponsorship and microloan programs has led to a 97 percent payback rate.
Experts like Burbank caution that MEE is not a panacea. For refugees or victims of natural disasters, or in communities devoid of basic vocational skills or hope, a loan program is premature. The earlier phase costs a great deal of money but is necessary in crises or chronic illiteracy and poverty. In 1985 a volcano in Amero, Colombia, spewed forth lava, killing an estimated 25,000 people. They first needed shelter, food, and other emergency assistance. But today 40 families left homeless by the tragedy are homesteading on an abandoned 265-acre ranch and have formed an agricultural cooperative. With a small loan from World Vision, they are purchasing seeds and fertilizers. With proceeds from their harvests, they plan to pay off their loan and have enough profit to make a down payment on the ranch.
In general, loan programs work well in communities with some tradition of entrepreneurship and where people are motivated to better their economic lot.
Evangelism and MEE
MEE’s proponents agree that evangelism is an important element. Conversions and discipleship result from one-on-one encounters, an approach Opportunity International calls “marketplace evangelism.”
Sokha Eim, the World Relief promoter in Cambodia, often encounters superstitious women who feel it is a sin to eat during a certain part of the day. When she asks what they do about their sin the rest of the time, they respond: “We have a ceremony to take care of all those other sins.” She then counters with the question: “Will that ceremony ensure you get to heaven?” When the women express ambivalence, she tells them about heaven, and how Jesus is the bridge to heaven. She recently told World Relief’s Linda Keys that this loving confrontation has resulted in a great deal of interest in the person and ministry of Jesus Christ among women in the mothers’ banks.
Thurman says loan facilitators are vocal about the fact that they pray daily for each client’s business and family, and they openly share their faith with clients. In countries like India, meetings between the loan facilitator and the client occur at the client’s business. Since many of these are on street corners, a crowd often gathers as the businessman or-woman and the counselor discuss Christian-based business practices. Several mini-evangelistic rallies have occurred as a result of spectator interest and the boldness of the loan facilitator.
Benjamin Montemayor, head of an Opportunity partner agency in the Philippines, says that loan facilitators train clients in “Christian values and in using credit at the same time. When we go into a community, we start with prayer. If our loan recipients are comfortable with this, we move on to Scripture study. And the people open up.”
Ted Vail of Food for the Hungry in Kenya says Christian businessmen recruited as mentors to loan clients are “a key part of the evangelistic effort.” Maranatha Trust of Australia, whose founder, David Bussau, is an MEE pioneer, periodically surveys loan clients, asking them, “Is the presence of God more apparent in your community?” The answer is usually yes. Thurman adds: “We are raising up leaders all over the world as we form boards of directors and facilitators who are Christians. And those people are leading thousands of people to Christ each year.”
Burbank recalls attending an early-morning staff meeting of facilitators at a Honduran partner of Opportunity International. He said the staff prayed for each other, their clients, and the communities they touched. “These people are red hot for the Lord,” he said. “They have a fervor that is focused on their work, and they are very effective at sharing their faith.”
Says World Vision’s Seiple: “When the church steps out to make sure those in need are being taken care of, and when it does so in a way that empowers people, it is a win-win situation.”
Loren Wilkinson is the writer/editor of Earthkeeping in the ’90s (Eerdmans) and the coauthor, with his wife, Mary Ruth Wilkinson, of Caring for Creation in Your Own Backyard (Servant). He teaches at Regent College in Vancouver, British Columbia, Canada.
