the friend online
18 July 2008

The power of microcredit

Jennifer Kavanagh charts her involvement with a scheme that transforms lives

In 2006, Muhammad Yunus, a Bangladeshi Professor of Economics, won the Nobel Prize for Peace. Yes, not economics but peace, in recognition of his creation in the 1970s of the Grameen Bank, the model of microcredit. In recognition that creating a radical tool for eradicating poverty is about justice, equality and peace.

In 1999 I was running a community centre for Quaker Social Action, in London's East End. I realised that some kind of financial intervention was going to be necessary for the women I was working with, in one of the most deprived wards in the country, and remembered reading, years before, about the Grameen Bank. I was fortunate enough to win a Churchill Fellowship to go to Bangladesh and elsewhere, and learn the reality of microcredit.

Despite its unattractive name, microcredit is not primarily about money. Aimed at the destitute and believing in the unlimited potential of every human being, it is a radical system in which vision, discipline and a well-thought-out structure are combined to enormous effect, as has been proved by millions of people in over 60 countries. Small amounts of money are lent for capital items to enable people (usually women) to start enterprises. It does not demand collateral but relies on the formation of borrowing circles through which women support each other and guarantee each other's loans.

The formation of groups, the discipline of attendance and the peer support and pressure are what makes this form of credit succeed. The skills and common sense lie within the group, the members of which empower themselves and each other by mutual belief and support. The loan fund is recycled; repayments enable others to benefit; the results ripple out into the wider community. Repayments world-wide are about 97 per cent: people do not want to let down their friends.

A couple of years after my trip, in a workshop for some 150 microcredit workers in India, participants were astonished to hear about microcredit in England, that rich country. When I described the circumstances in which some people live: fragmented communities, single mothers struggling to work and bring up their children, problems with childcare, they looked at me with pity: 'Childcare? How can there be a problem? We look after each other's children.'

It is easy to think that poverty is somehow 'out there', to ignore our own poverty, material and otherwise, and the financial exclusion that faces thousands of people every day in this country. Credit crunch? For some, that is nothing new. With few assets, no job, maybe a bad credit rating chalked up by a former partner, access to credit is denied – unless it be from a loan shark with uncapped levels of interest. We are one of the most indebted nations in the world.

So we do not want to add to debt or set anyone up to fail. Amounts are kept small, and a loan is made only when a business is developed to the point that customers are knocking at the door. Small weekly repayments start immediately. Because of the benefit system, a higher standard of living, greater competition, and more complex legal and financial structures, a microcredit programme is harder to establish in developed countries, but it can be done, as the success of QSA's 'Street Cred', now in its ninth year, and the recipient of a British Urban Regeneration Award, has shown. Numbers are smaller, running the programme more labour intensive, but in this country, too, microcredit is moving women out of poverty.

If set up with discipline, it is a beautiful process that can work anywhere. Having seen lives transformed in Bangladesh, South Africa, Madagascar, and here; having seen the light in women's eyes as they are given trust and encouragement; having seen the growth and empowerment of the workers, I know it works.

It is 'helping one another up with a tender hand'.

Jennifer Kavanagh is a member of London West Area Meeting.

Quaker Social Action
Grameen bank
Quaker Social Action wins another award the Friend, 27 June 2008.
A year of 'knees-ups' in the East End the Friend, 20 June 2008.
Preparing for the inevitable by Judith Moran the Friend, 22 February 2008.
Banking on building communities the Friend, 4 January 2008.

The Friend provides fresh insight with news about and of interest to Quakers every week, in depth thought and reasoning through our comment, opinion and analysis pages, features that bring vibrancy to Quakerism, as well as reviews and arts pages that add to Quaker culture. Subscribe here.

Also by Jennifer Kavanagh
Homeless without help the Friend, 16 May 2008.
Sharing an African experience the Friend, 8 February 2008.

Jennifer Kavanagh


This week's .pdf
In this week's online edition... rss edition
Quaker charity leads the way in tackling financial exclusion
Tough times for war resisters in Canada despite parliament’s help
Jez Smith
FUM Triennial news
Oliver Robertson
Scottish government says no to Circles
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Challenging consumerism
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Mary Barnes & Ann Frost

The power of microcredit
Jennifer Kavanagh
Tackling financial exclusion
Esther de Jong
A house of cards
Judy Kirby
A selfish gene?
Edward Mackay
With Friends like these
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Is there a gap?
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