May 11, 2005


New evangelism: mini loans (Michael D. Kerlin, 5/12/05, The Christian Science Monitor)

These days, Christian and other religious organizations, both here and around the world, are lending more than just a hand. Microloans - of as little as $100 - have become as much a part of their ministries as preaching the gospel. While microlending for budding entrepreneurs has long been recognized among development experts as one of the best ways to fight global poverty - in fact, the United Nations has dubbed 2005 "The International Year of Microcredit" - religious organizations are increasingly adopting the Talmudic sentiment that the noblest form of charity is helping others to dispense with it.

The fund that provided Mukamana her seed capital started "because we could not keep up with the needs of our poorer members" with just handouts, says cofounder Josephine Mukamuganga. Since 2001, the program has provided loans for around 100 women.

Here in Rwanda, nearly 1 in 5 of small-business borrowers receives loans from religiously oriented lending programs. The 1994 genocide, which took the lives of up to 800,000 Rwandans, kept many international lenders from working in Rwanda. Even after the genocide, political uncertainty and violence in neighboring Congo and Burundi have continually threatened the sustainability of business ventures.

Into this void has stepped the Christian micro-enterprise development (CMED) industry. World Relief, for example, a Christian organization based in the US, specializes in small-business lending in post-conflict regions. World Relief has helped start microfinance programs in Mozambique, Sierra Leone, Kosovo, and Cambodia, among other places. Its Rwandan affiliate opened in 1996 and has grown into the largest microfinance institution in the country.

World Relief's affiliate here has more than 18,000 active clients and branches in 10 of Rwanda's 12 provinces. Borrowing groups of around 30 members, who are generally too poor to put up collateral, guarantee one another's loans. With the group's approval, individual members can take out loans for entrepreneurial ventures or other large financial needs like school fees and home improvements.

The loans are not charity. The lender charges 2.5 percent per month, or the equivalent of 30 percent annually. Though the rate is higher than most commercial banks charge, it is far lower than the terms offered by community loan sharks. High interest rates are also needed to cover the high costs of processing loans to the poor.

CMED groups often cite several biblical citations as providing the impetus for what they do. "If one of your kinsmen in any community is in need ... you shall open your hand to him and freely lend him enough to meet his need," reads the book of Deuteronomy in the New American Bible. CMED organizations are encouraged to use the "parable of the sower," in which Jesus praises wise planting practices to show the importance of utilizing God's resources well.

For those involved in CMED, some of those resources are spiritual. For example, World Relief's loan officers start their meetings with prayers. Ken Graber, who consults worldwide for World Relief's microfinance affiliates, says that "in the absence of biblical values, the previously exploited will turn and exploit others as they move ahead economically."

World Relief's services are, however, open to non-Christians. And Christian organizations are not the only religiously oriented institutions to offer microfinance services. Jewish Vocational Service provides financial advice and some loans to low-income residents of several US cities. And in East Africa and Central Asia, the Aga Khan Foundation, a Muslim group, provides microlending services.

Interesting that repayment rates tend to be culture dependent, requiring that folks feel a pre-existing moral obligation.

Posted by Orrin Judd at May 11, 2005 11:31 PM

Microlending's not a cure-all, but this guy is a Borlaug-sized mensch.

Posted by: joe shropshire at May 12, 2005 12:35 AM

Government-to-government aid is always a failure. The only valid economic aid to the Third World is either microlending or tech transfer to individuals and small businesses.

Posted by: bart at May 12, 2005 10:31 AM