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Thursday, October 06, 2005

ABN Amro micro-kredieten in India: groot succes verdient navolging

A photo exhibition in ABN AMRO’s Amsterdam headquarters shows pictures of women in India who have started their own business using an ABN AMRO microfinance loan.
With 2005 being the United Nations International Year of Microcredit, this exhibition aims to bring some attention to the work that ABN AMRO is doing in India and celebrates the 100,000 microfinance loans granted so far. 
Microfinance, also known as microcredit, involves lending small amounts to poor people to help them start a business. Often, the only other alternative for these people is to get money from ‘loan sharks’ who are mostly illegal and charge extortionate interest rates on any amount lent.

Working with reputable institutions
Moumita Sen Sarma, head of microfinance in India, explains. The process starts when ABN AMRO in India teams up with a reputable microfinance institution (MFI).
“We place great importance on choosing organisations that have the potential to be profitable, the right type of leadership and internal controls,” says Moumita.
ABN AMRO then lends money to the institution, who decides where the money can best be spent.
The MFIs will know local projects, the culture and language, enabling them to be in close touch with the clients. 
The MFI will find a group of women who each receive a loan of maximum EUR 150. Each woman will spend her money on something she feels will help sustain her and her family. 
One of the women will be the ‘leader’ of the group. At a weekly meeting with the field officer, the leader will make the collective weekly repayment of the loan. If one of the women in the group is unable to make her repayment for that week, the other women will get together to pay her share. The loans provided have to be paid back in 50 weeks, including the interest. 
Common use of the loans include large farm cattle, making jewellery, selling popcorn, doing car repairs, mattress-making and running a ‘general store’. 

It’s not charity
“Don’t think microfinance is charity,” says Moumita. “It is all about business.”
The microfinance business in India has ended the year with an operating profit, taking into account all costs. “The default rate on the credits is 0%, so these women are the bank’s best clients in terms of repayment,” she says. 
There’s a lot of growth in the market for microfinance and many banks are now getting involved.
ABN AMRO can be proud that it is one of the only foreign banks that gets involved on such a scale. With approximately 430 million poor people in India and an average of six people per household, there’s a potential market of 72 million households. Our target is to have provided at least one million loans by 2009. 
If you want to know more about the photo exhibition please contact Laurien Meuter.