Questions & Answers:

What is microcredit?
Developed over the last twenty years, microcredit is one of the most effective tools we have to fighting poverty. It is not a charity, but investment. In addition, to understand it we need to look at poverty in the world today. More than one out of five people in the world (1.3 billion people) - struggle to live on less than $1 a day. They are trapped in poverty so severe that they can not adequately feed, clothe nor shelter themselves or their families. More than half the global population (3.2 billion) survives on less than $400 a year per capita. Steady jobs and income elude the very poor. To get by, many people create and run their own tiny businesses (micro-enterprises) in the unregulated, "informal" sector. They might sell produce at the market, or shine shoes, weave mats, or bake bread. Micro- enterprises may be small, but their cumulative impact is huge, depending on the country. Micro-enterprises employ an estimated 30-80 percent of the working population. Microcredit- also called microfinance and microlending - means providing small working capital loans for the self-employed poor. Even small amount of capital, typically $30 to $100 can make a difference between absolute poverty and a thriving little business generating enough income to feed the family, send kids to school, and build a decent housing.

What good can $30 or $100 do?
To the poorest micro entrepreneurs in the developing world $50 is a fortune. They can invest that money to make their labors far more productive: They might buy a used sewing machine so that they can make dresses faster than by hand stitching. They might invest it in a used refrigerator to keep the produce they sell from going bad overnight. They might buy thread for weaving in bulk, at wholesale prices, so they make more on every item.

Who are the current and potential clients of microcredit?
So far, 13 million micro entrepreneurs worldwide have benefited from microcredit, using their loans to increase their income and lift their families out of poverty. But there remain 200 million families who work hard, but cannot access affordable credit.

What are the principal benefits of participating in DPG?
DPG breaks the vicious circle of poverty. Without credit, poor people may work hard but stay poor because of a lack of opportunity and capital. DPG borrowers receive working capital so that their efforts can become more productive. For instance, they can buy rice in bulk at wholesale prices, and resell at retail prices. They can buy a used refrigerator to keep produce fresh; they can purchase a sewing machine instead of stitching by hand. As entrepreneurs become more productive, they increase their income and are able to accumulate saving for the other investments and for emergencies. In every program, DPG borrowers say they spend increased earnings on children first, improving nutrition, health, and educational opportunities. In most cases, borrowers greatly expand, even double, family food purchase with the first loan.

What is DPG's overall loan repayment rate?
Despite the fact that we work with the worlds poorest and do not require collateral, DPG's repayment rate is excellent. The Average, on-time repayment is 93 percent, better than most commercial banks expect.

How does DPG identify and target the severely poor?
We seek out the poorest communities of the countries in which we work and we keep our loan sizes small. Only the very poor are likely to commit to weekly meeting just to be able to get a $50 loan for three months, six months or one year.

What do the governments think about DPG?
As self-employment becomes the biggest source of employment in developing countries, governments are becoming more interested in microfinance. Today, more than half the working poor in the developing world make their livelihoods in micro enterprises in the informal sector. DPG is working closely with multilateral agencies to help governments create a regulatory environment in which microcredit providers directly to the needy, without government interference.

Who funds DPG?
The majority of our funding comes from private foundations, banks, corporations, service and charity organizations, and individual donors.

What percentage of total funding received by DPG goes toward administrative expenses?
The DPG Board of Directors mandates that administrative costs, including fundraising, never exceed 25 percent of our total expenses. Currently, approximately 20 percent of our budget is administrative.

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How much "Morabaha" does DPG charge borrowers?
Most DPG programs charge 1-2 percent a month. This level helps support the intensive technical assistance provided to the groups. Commercial banks, while their rates might be lower, do not lend to people like our clients. The only alternative available to many before DPG arrives, are moneylenders who often charge as much as 10 percent interest per day.

What happens when DPG leaves? Can these programs become self-sufficient?
Our aim is to help DPG country programs become self -sufficient-i.e.to get to the point where they can cover all their costs and rely on their own resources instead of donations. DPG prefers to stay involved until that point.

What are DPG's medium-term goals?
We aim to serve 100,000 clients by the year 2006.

Who provides microfinance?
Most commercial banks in the U.S. will not make small business loans below $10,000. For others, the minimum is $25,000. These amounts are similar in developing economies. But beginning entrepreneurs-particularly low-income entrepreneurs- cannot use such large sums of capital, nor can they afford to borrow such a sum.
That is where microfinance, or microcredit, agencies come in. These are non-profit organizations dedicated to reaching the poor with small loans that enable borrowers to work their way out of poverty.
Hundreds of smaller microcredit agencies are at work around the world some in single country or region, some in a single neighborhood. Some charity organizations feature microcredit as one of their services.
Microfinance is so successful in reducing poverty that even the World Bank and other major international institutions have increased their commitment to microlending, and there are new organizations engaging in microlending every day
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