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Seattle Post-Intelligencer

Seattle Post-Intelligencer

Microcredit: Economic success

There's another economic story besides the crash-down effects of policies relying on superwealth, greed and speculation. It's the success of the microcredit system.

Once written off by banks, many of the world's poorest people now have a credit system that is serving them well. The practice of lending tiny amounts to let the poorest individuals start enterprises has blossomed from Bangladesh's Nobel laureate Muhammad Yunus' Grameen Bank into a worldwide movement.
The Microcredit Summit Campaign announced Monday that, as of 2007, the small loans had reached 106 million entrepreneurs worldwide and, including the family members, about 500 million people. That has created opportunity, hope and success in Asia, Africa and this country.

Increasingly, microcredit should be viewed as a model for U.S. foreign aid efforts and as part of the economic recovery drive here. It's a good moment for a movement built on doing the opposite of the major financial institutions.

Yunus said in a teleconference that he founded Grameen without a particular strategy, but when he later looked back, he realized he had pursued a particular course. Other banks looked for big accounts; he worked in tiny amounts affordable to poor villagers. The banks lent to men; his customers were mostly women. When banks got in trouble over subprime loans, he could see the success of sub, sub, subprime loans.

Yunus said Bangladesh's microcredit is feeling no squeeze. In this state, Cheryl Sesnon of the Washington Community Alliance for Self Help said the group's ability to lend for microcredit projects has also been holding up.

Sesnon said there are worries about individual donors' ability to keep making social investments. But there is a lot of interest from the Small Business Administration and other federal agencies in groups like hers, which makes loans ranging from $1,000 to $35,000 and develops long-term relationships with clients. A typical client has a family of three and a $16,700 annual income.

Enrollment in Washington CASH business skills classes is growing rapidly. Many people, Sesnon said, "had jobs. They lost their jobs. ... They don't know what they are going to do. They think, maybe it is time to start a business."

After working on economic stimulus, a new administration and Congress should reform foreign aid. In both areas, microcredit's hope, spirit and success offer important lessons.