FAQ'S

HOW MICRO-CREDIT STRATEGY WORKS?

Micro-finance refers to a peaceful revolution of credit to the poor. It is an anti-poverty strategy that has helped many working poor in third world countries to escape from poverty. It describes a poverty-lending program. The program specifically targets the poorest of the poor who are usually women. This is because this group is disproportionately represented among the world's poor. With a small amount of capital, women can work their way out poverty, they can get the loans they need to increase their incomes and transform their lives, to gain respect and dignity and their rightful place in society. A typical Micro-credit loan averages from $35 and have sometimes been less than that. For some, a very small loan, as little as $50 will allow them to improve their businesses and eventually begin to accumulate savings.

The borrowers, mostly women, are required to organise themselves into groups of five and learn the rules before they can get loans. The members of the group support and encourage each other, and take individual responsibility for their own loans as well as collective responsibility for the group.

First loans average $35, they can be less or more than that. Subsequent loans are larger, and will largely depend on the success and timely loan repayment schedule. The people who receive loans work together to ensure the success of each business. Whereas personal tragedies, such as untimely deaths in families of members of the groups cannot be escaped, the vested interest in the success of the program ensures that help is always available in form of mutual support from participants.

WHY MICRO-CREDIT WORKS?

The concept of micro-credit works because it is modeled after a proven informal group-lending scheme for mobilizing savings and credit among the poor who have no means of access to traditional financing institutions. In formal financing, banks don't lend to people without education, collateral and business experience. If a bank decided to do poverty lending, as is the case with micro-credit lending, you would expect the bank to look for the most aggressive, dynamic personalities who might have the best chances to succeed in business. In a group-lending scheme, the participants who contribute an agreed sum of money to create a pool fund, out of which loans are given, guarantee each others loans, they also support and encourage each other as a collective responsibility.

This may seem bizarre to many of us, but this experience proves that almost anyone can succeed with a little encouragement. The micro-credit lending succeeds because it is based on a business model. These micro-loans are actually changing lives as well as market fundamentals in the economies of poor countries. The poor should not be treated as dependents incapable of becoming self-sustaining. The poor people are extremely capable, intelligent and worthy of respect.

WHAT GOOD CAN $50 OR EVEN $100 MAKE IN A PERSON'S LIFE?

With a loan of $100, in the hands of a needy and enterprising woman In a poor country, one can start a small business, repay the loan in a year, while still owning the productive assets. Over time, one can earn enough to escape from poverty. These poor people are not looking for handouts. They are looking for a way out of poverty. Such a small loan can mean all the difference between success and failure, or between survival and desperation.

HOW ARE POOR PEOPLE ABLE TO PAY BACK LOANS?

Yes, they are poor but not undisciplined. Group members support and encourage one another and take individual responsibility for their own loans as well as collective responsibility for the group. This minimizes the chances for default on loan repayments.

WHAT HAPPENS TO MONEY DONATIONS GIVEN TO COMCARE'S MICRO-CREDIT PROJECTS?

Your generous contributions are used to provide urgently needed credit to the working poor, who are especially women, that find themselves very often shut out of formal institutional lending. Your money donation is used to create a pool fund out of which small business loans are awarded to needy workers to start income generating activities. As loans are repaid successfully, members qualify for larger loans and their repayments are recycled to others in the form of new loans. As loans are repaid with a small interest, these micro loan programs become self-sustaining over time. The interest charged is used to defray operating expenses.

WHO DETERMINES WHERE AND HOW THE MONEY IS INVESTED?

Many of these people are just looking for a way to improve the small businesses they own. Most of them already know what they need to make a leap from subsistence living to relative prosperity. If only they could be facilitated. They know what type of businesses will or will not work because they understand the local economy better.

DON'T CHARITIES GIVE MONEY TO POOR PEOPLE?

Micro-credit is an anti-poverty strategy. It is different from traditional charity in that money is not simply given to people. It is loaned to them and is paid back with interest. It works much like a bank in that customers are charged a fee for services provided.

ARE DONATIONS MADE TO COMCARE AID PROJECT TAX DEDUCTIBLE?

Yes. All donations to Comcare are tax deductible in the USA. Receipts will be provided as gifts are received.