donating a penny, you can help end poverty in a very real way.
Investing in microcredit or microfinance is not a donation or charity. Like other investments, the money is always yours. You even earn a small amount of interest. Yet for every $1,000 you invest, you can end poverty for several entire families in the developing world every year. That is why the United Nations declared 2005 to
be the International Year
of Microcredit and why the founders of the microcredit movement were awarded the Nobel Peace Prize in 2006. Major media articles have sung the praises of
microcredit, also known as microfinance and microlending:
New York Times: Tiny Loans Make a Big Difference in Lives of Poor
USA Today/Associated Press: Microcredit pioneers win Nobel Peace Prize
Wall Street Journal: A new way to do well by doing good
Microfinance funds lift poor entrepreneurs—and benefit investors
Microcredit in India, High finance benefits the poor
For a powerfully inspiring talk by the Nobel-prize-winning founder of the first microcredit institution:
Microcredit Guide: How Your Money Works to End Poverty
1. Mariate Banda runs a small beauty shop in Zambia near the South Luangwa
National Park. Visitors to the park flock through her town, but few tourists
venture into her shop, as it lacks the modern hair dryers travelers expect.
Her small income makes saving difficult. "My life's ambition is to have
my own equipment" she says—even one modern hairdryer for tourists (see photo &
description of Mariate in the Sept 2005 issue of National Geographic, p. 120).
Using your investment through the growing international microcredit movement,
Mariate takes out a microloan of $100—small by western standards, but
more than enough to pay for a modern hairdryer in Zambia. With the increased
tourist traffic to her shop, Mariate pays back her loan within a year. Once the loan is repaid, she has now greatly increased her income and can
afford to keep her children in school, give them good medical care, and build
her business further. You pulled this family out of poverty!
2. Working 10 to 12 hours six days a week, 36-year-old Supratno drives
a pedicab (bicycle taxi with three wheels) in the suburbs of
Jakarta, Indonesia. As over 50% of his daily income goes to pay rental fees
to the large syndicate which monopolizes pedicab rentals in Jakarta, he barely
ekes out a living for his family of four. His daily income averages about
US $4 per day, which is only enough to put rice and vegetables on the table
for his family twice a day. He cannot afford to pay the small fees for administration
and mandatory school uniforms to send his children to public school.
out a microcredit loan of $200 from money you invested, Supratno buys his
own pedicab for the first time in his life. As all income now goes directly
to him, his daily income is more than doubled. Within a year, he pays
back the $200 loan and can now afford to send his children to school and give
them three good meals every day. You pulled this family out of poverty!
process is actually a little more involved than described above. Business
plans are required to be submitted to a volunteer cooperative and loans are
made in increments, but you get the picture. Your loan of $1,000 for one year
can literally pull several entire families out of poverty for good in the
developing world. The interest you receive on your microcredit investment is low—generally
up to four percent—but you have the satisfaction of knowing that for
every $1,000 invested, you have helped several families every year to pull out of poverty and live
a much better life! I'd say that's a pretty good return on your investment.
first heard about microcredit back in 1999, I was very excited. As a part-time
interpreter for the US Department of State and a part-time nurse, my work
provided no retirement benefits, so I had diligently been investing
a percentage of my income in order to be able to retire at a reasonable age.
I had saved over $100,000 towards my retirement at the time and was interested
in finding better ways to invest this money.
Socially Responsible Investing and Microcredit
years prior I had practiced socially responsible investing (SRI), where both the
investor's financial needs and an investment's impact on society are considered.
With SRI, I had the high returns of Wall Street on my investments while knowing
that my money was not being used to promote socially damaging concerns such
as alcohol, tobacco, gambling, weapons, and sweat shops. For more on SRI, click here.
I realized I would be giving up the high returns I had been getting with SRI.
Yet knowing that every $1,000 dollars I invested would help to pull several
families out of poverty every year, I was more than happy to settle for a
2% return. Within a few years, I had every penny possible invested in microcredit. So though I'm only getting a modest (but very secure) financial return
on my retirement investments, I'm now helping hundreds of families every year
to pull out of poverty!
the International Year of Microcredit, UN
Secretary-General Kofi Annan stated, "Microfinance has proved its
value as a weapon against poverty and hunger. It really can change peoples'
lives for the better—especially the lives of those who need it most.
With access to microfinance, [the poor] can move beyond day-to-day survival
towards planning for the future. They can break the vicious circle of poverty.
Microfinance is not charity. It is a way to extend the same rights and services
to low-income households that are available to everyone else. It grows productive
enterprises and allows communities to prosper. Let us use this International
Year of Microcredit to put millions of families on the path to prosperity."
For the official
website of the International Year of Microcredit, click here.
Also referred to as "community investing," you can learn more about
transferring your savings and investments to microfinance by clicking here. For detailed information on specific microcredit organizations and more, see the microfinance database at this link.
Download a free 24-page guide to microcredit and community investing by
clicking here. And note that these investments are not influenced by market
Many organizations specialize in microcredit investments. Most require a minimum investment of $1,000 or more. For a table of respected microcredit organizations:
click here. Calvert Foundation has worked best for me, as they have a
great track record and channel their investments into numerous respected microcredit
organizations worldwide. Calvert also allows you to choose in which region
you want to invest. I have all of my money invested internationally because
$1,000 goes a lot further in the developing world than it does in industrialized countries.
If you are interested, see the Calvert
Foundation website or call 800-248-0337. For those outside of North
America, see http://www.oikocredit.org.
Even if you
don't have much money, consider investing just $1,000 as a way of knowing you are helping other families to pull out of debt. If you have an investment portfolio, consider putting 10% or more into microcredit as a way of playing your part in creating a more fair and just world for all. If your investments are tied up in 401(k)s or other tax-deductible instruments, call 800-248-0337 to learn about ways
you can transfer these funds to microcredit. To make a smaller microloan and make a difference in someone's life, see http://www.kiva.org ($25 minimum). By investing whatever amount
feels right to each of us, we can and will build a brighter future for ourselves
and all who share our world. Thanks for caring, and you have a great day!
With very best
wishes for a transformed world,
Fred Burks for this website and the PEERS Team
Former language interpreter for Presidents Bush and Clinton
P.S. For an
excellent financial planning handbook focused on socially responsible investing
and microcredit, click here. And to move your checking and savings accounts from profit oriented banks to membership run credit unions, click here and here. As I am very passionate about ending poverty through microcredit, feel free to contact me with any questions by clicking here.