Urban microcredit in Paraguay.
by MEDIA CONTACT RESOURCES, INC.
Microcredit is established around the world as a dynamic
development tool creating viable markets of every kind where none have
existed. A microcredit program called ACRES, in one of the poorest
neighborhoods of Asuncion, the capital city of Paraguay, uses several
marketing innovations to leverage the power of very small loans to
create wealth in an urban setting.
ACRES was highlighted in a May 26, 2007 story distributed by the
Inter Press Service (IPS) (Rome.)
The program is a spinoff of the Health for All Mutual Aid Center
(CAMSAT), which has been operating for 17 years in the Banado Tacumbu
neighborhood. CAMSAT is sponsored by the Catholic Church. More than
10,000 people live in Banado Tacumbu, and CAMSAT estimates that 85
percent of the population does not participate in the formal economy.
The 15 percent who do typically earn less than the minimum wage of
us$240 per month.
Among the innovations used by the program is the practice of
lending to five person groups rather than individuals. The group idea
marshals peer pressure to help ensure that loans are repaid. IPS says
that 97 percent of loans are repaid.
Another innovation is that no documentation is required. All ACRES
asks of its clients is a personal promise to repay the loan. Commercial
banks in Paraguay ask for "a ton of documents," according to
one ACRES client quoted in the IPS story who did not qualify for a bank
loan because she was unable to produce collateral or a guarantor.
ACRES says that is it highly proactive in the neighborhood. Program
loan officers, "actually go out to knock on doors in search of
clients." The officers look for local opportunities and stir up
interest in these potential businesses.
Loan interest rates are 1.6 percent compared with 20 percent to 26
percent as regulated by Paraguay's central bank in the formal
economy. Repayment plans are tailored to what a borrower can afford. An
initial loan is us$60.00 and can be increased after borrowers repay. IPS
says that the United Nations Development Program (UNDP) cited the parent
organization, CAMSAT, as a model of community development work.
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NOTE: All illustrations and photos have been removed from this article.