DEVELOPMENT-VENEZUELA: Micro-Credit Pioneer Advises Chavez Gov’t

By IPS Correspondents Reprint | | Print |

Andrés Cañizález

CARACAS, Oct 12 2001 (IPS) - Mohammad Yunus, who 25 years ago launched a successful campaign in Bangladesh to help the poor by providing tiny loans to start up micro-enterprises, is now attempting to help revitalise a similar initiative in Venezuela.

Yunus, who in 1976 founded the Grameen Bank, also known as “the bank of the poor”, and two other Bangladeshi experts visited Venezuela this month to assess the nascent micro-credit programmes being promoted by the Hugo Chávez government.

The Venezuelan president had met with Yunus earlier this year during an official tour through Asia, laying the groundwork for Yunus to bring his experience and knowledge to this South American country.

“The micro-credit system must begin with the poorest sectors of the population. That is one of the recommendations I made to Chávez,” Yunus said in Caracas.

In late 1999, the Chávez administration created the Bank of the Sovereign People, with three initial credit lines for “solidarity”, “women’s” and “productive” micro-loans. But by mid-2001, the directorate of the project was fired due to discouraging results and a series of corruption charges.

The Bank of the Sovereign People granted small loans totalling just 2.8 million dollars last year, despite holding 30 million dollars in available capital.

The bank’s former president, Francisco Rodríguez, attributed the poor performance of the project to “the lack of an appropriate legal framework” and of an adequate infrastructure.

In another approach, Chávez announced in January the creation of the Women’s Bank, aimed at serving the population that, in the Grameen Bank’s experience worldwide, tends to make greatest use of the micro-credits.

The Women’s Bank began operating in August with 14 million dollars in capital and offering loans ranging from 420 to 7,000 dollars for small-scale development projects.

The government also pushed what is known as the Micro-Finance Act through Congress, which entered into force Apr 23. Now the Chávez administration is drawing up reforms for the Banking Act, which is to include a chapter specifically covering micro-loans in a bid to encourage private banks to provide such services themselves.

“Do not look at this measure as an imposition, but as a business opportunity,” Yunus told Venezuelan banking executives at a meeting organised to exchange points of view and information, particularly on the Grameen Bank’s experiences in Bangladesh.

In conversations with Chávez administration officials, Yunus said they must ensure that the micro-credit projects do not involve government entities alone, but that they join forces with the private sector and civil society organisations.

“The state should limit itself to creating the conditions for carrying out the idea,” explained the expert, adding that “banks should not be the only ones receiving incentives. Any interested company should be able to provide micro-credits.”

Nora Castañeda, president of the Women’s Bank, told IPS that she is in favour of establishing links with non-governmental groups and with other government entities that work on women’s issues so that they might expand the institution’s activities.

Castañeda, commenting on the Grameen Bank’s experience, said she would put into practice the formula of encouraging women to form associations of four or five members in applying for loans. Under this approach, each woman is responsible for her share as well as for the total sum of the micro-credit.

The Grameen Bank of Bangladesh currently has more than two million debtors, 95 percent of whom are women. “The poor do pay,” Yunus said, and the hard numbers prove him right: over the bank’s 25-year history, the default rate has averaged just one percent.

Yunus noted that there is “an enormous commitment” in the Chávez administration to promoting the micro-credit system, but based on the evaluations he and his fellow Grameen Bank experts made in Venezuela, “micro-credits are not reaching the areas that most need them.”

To achieve greatest effectiveness, Yunus said the initiative must reach beyond Caracas and neighbouring areas. “The challenge is to take the initiative to the regions of the country’s interior, to the most isolated and poorest communities.”

He said he had further recommended to the authorities that any micro-finance system must be self-sustainable.

“It must not depend on government financing or subsidies, but become a truly commercial banking system,” he said.

He has said that the Grameen Bank has no intention of opening “branch offices” in other countries, but it is willing to teach the system to others so that its experience continues to serve as a model in the fight against poverty.

Based on the assessment he and his colleagues conducted, and meetings with Venezuelan participants in the micro-credit programmes, announced Yunus, they developed an appropriate, country-specific methodology to carry the initiative forward here.

“Now it just needs to be implemented,” he said.