Big ambitions with small loans
'Lending to the poor has proven very profitable'
A teacher by training, Lynne Randolph Patterson never expected to find herself at the helm of a multi-national financial services company. Twenty years ago, she was volunteering at a young mothers club in La Paz, Bolivia, where her husband had been posted for work.
She was there to deliver empowerment lessons but the women, who attended twice a week in exchange for donated food, all told her one thing: “We need to earn money”.
Along with her colleague, Carmen Velasco, a psychologist, they began to offer the women business training and tried to find them credit.
Inspired by Grameen Bank in Bangladesh, they began to offer small loans of around $50. The women formed groups to guarantee each other’s loans, and made simple business plans showing how they would invest and repay their first loans.
“Not being very financial, we made lots of mistakes in the beginning,” she says. But they persevered, and Pro Mujer (Pro Woman in Spanish) as their organisation is now called, now provides 2,22,000 women with loans, business training and healthcare in five Latin American countries.
Lynne travels the globe drumming up support for Pro Mujer’s work. “You need to invest in women if you want a better future for children,” Lynne says.
The hope is that the women use the loans to start and grow businesses such as food stalls, allowing them to better provide for their families.
Lynne says the resources they are given helps women recognise their own value and achieve equality in their homes and communities. Many banks in developing countries do not lend to women. However, it is not always smooth sailing.
Defaults are rare
Often poorly educated and in precarious circumstances without collateral, the borrowers are surprisingly dependable. Pro Mujer says 99 per cent of all loans are repaid. But Pro Mujer’s group lending method ensures that defaults are rare. “If they don’t pay the loans back, they can’t remain members of the group,” says Lynne.
These low default rates have attracted new players to the sector in recent years and microfinance has become increasingly commercialised. Wal-Mart has set up a bank in Mexico to target those who can’t access mainstream financial services and hedge funds and pension fund managers, now view microfinance as a viable investment. “Lending to the poor has proven very profitable,” says Lynne.
Pro Mujer has no plans to abandon its social goals even though this may mean that its loans are more expensive than competitors.
“When you come to a Pro Mujer centre, you not only get financial services, you get access to healthcare services and social development,” Lynne says.
Pro Mujer’s business is now self sustaining in four of the five countries it operates. Lynne has hired new staff from major Wall Street banks to help expand the business into two new countries.
She hopes Pro Mujer will be able to triple the number of clients and increase lending the by the same degree. However, she acknowledges that microfinance is not a panacea for poverty and has its limits. “It’s not perfect but it’s hard to think of a more effective way to support women.”
BBC News
