Questions & Answers:
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.
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.
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.
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.
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
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.
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.
The majority of our funding comes from private foundations, banks,
corporations, service and charity organizations, and individual
percentage of total funding received by DPG goes toward administrative
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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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
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.
are DPG's medium-term goals?
We aim to serve 100,000 clients by the year 2006.
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.