A child in Mexico City earns his wage cleaning windshields. Photo: Beto (Kuh) (Flickr)

So far, more than 4 million Mexican families have benefited from a government program aimed at combating some of the country’s toughest problems: poverty, illiteracy and poor health.

Oportunidades, which began in 2002, takes the innovative approach of paying these families to go to school, eat well and stay healthy. Eight years later, the concept is gaining international momentum.

The program is based on a “conditional-cash” idea, whereby eligible adults are given money for achieving specific goals, including regular medical checkups, taking classes on healthier eating habits, and making sure their children are enrolled in school.

Santiago Levy, a social economist and one of the men credited with implementing the “conditional-cash” approach in Mexico, recently spoke about Oportunitidades with PBS. Levy said that he wanted to focus on lasting ways to bring people out of poverty.

These families were trapped in … some kind of an intergenerational mechanism, by which parents were poor, children were poor, and the next generation were also poor. The kids were so poor, they had to be picking coffee in the fields, and they couldn't go to school ... [Through Oportunidades,] what you are saying is, your kid will be equally valuable to you if he's in the school, as opposed if he is in the street begging for money.

One of the most intriguing aspects of Oportunidades is its rigorous evaluation process. The program uses an outside firm to review every aspect of its impact, and so far the results have been convincing. In some affected regions, school enrollment is up 20 percent for girls and 10 percent for boys, according to a World Bank report.

The unique evaluation process has also offered Oportunidades a certain degree of credibility and international recognition. PBS reports that more than 30 counties — many in South America and Southeast Asia — are developing their own "conditional cash" programs.

Check out this video to hear directly from Howard and learn more about Vittana. Photo: Vittana

Microfinance, as a poverty alleviation strategy, was popularized in the development sector thanks to the work of Muhammad Yunus. Traditional microfinance loans are distributed to small business owners and entrepreneurs with the goal of increasing the scale and profits of their businesses. What is surprising is that after more than thirty years of growth and popularity, the microfinance sector has largely neglected student loan programs.

One reason for this gap is that there has yet to be a proven track record of success for such loans. It was not until Yunus was awarded a Noble Peace Prize, and the astonishingly high repayment rates from borrowers were documented, that large scale funding institutions invested their resources toward microfinance. Vittana, a startup nonprofit were I currently intern, is working to create a track record of microfinance for student loans in developing countries by using a peer-to-peer lending platform.

Student loan programs are effectively nonexistent in countries outside of the US and Europe. Vittana helps students like Howard Rene Alvarez Morales receive the funding they need to get a higher education. Howard is a 21 year-old law and business management student at the Universidad de Ciencias Comericales in Nicaragua. He is an ambitious student who goes to school on the weekends, works as a legal assistant during the week, and takes English classes at night. In order to complete his thesis and get his degree processed, his university charged him a fee of over $1,000, a large sum of money he did not have. In an interview Howard said, “The main problem I have encountered is finding the financial means to finish my degree.” Vittana was a part of Howard’s solution.

Vittana formed a partnership with the microfinance institution (MFI) AFODENIC in Managua, Nicaragua. Our staff provided the expertise, and individual small-scale lenders provided the capital needed for AFODENIC to establish a sustainable student loan program. Howard received an student loan of $1,044 and was able to pay his school fees. The law and business management degree he is working toward is projected to increase his annual income from $2,000 to $12,000. Beyond Nicaragua, Vittana has MFI partnerships in Peru, Paraguay, Mongolia, and Vietnam and will soon be expanding to additional countries. Our long-term vision is a world where students, no matter where they live, have access to higher education.

Howard is pursing his degree because what he wants most “are the means to work and succeed, and everything begins with the first step.” When that first step is a degree, it is a giant stride toward ensuring that students and their families stay out of poverty and have more sound economic futures. Thanks to Vittana, when I imagine microfinance borrowers, I no longer only see animal farmers, salon owners, and the like. I also see students like Howard.

What can you do to help?

It is because of lenders like you and me that Vittana students have access to higher education. Visit www.vittana.org to find the student you connect with and make a loan today. Alternatively, purchase a Vittana Gift Certificate to empower someone in your life to become a lender.

We’d love to hear what you think! questions@vittana.org

A Mercy Corps small business loan helped Najeeba expand her successful baby cradle business in Kabul, Afghanistan. Photo: Cassandra Nelson/Mercy Corps

Over the past decade, Mercy Corps’ microfinance services have lent more than $1.5 billion, reaching more than one million people. Twelve Microfinance Institutions (MFIs) founded and supported by Mercy Corps operate all over the world, with 270,000 active clients — 65 percent of them are women. To better serve those excluded from formal financial services, Mercy Corps is working with these MFIs to develop and offer savings, remittances, and micro-insurance services as well.

I recently sat down with Zhanna Zhakupova and Jim Anderson who were in town for a microfinance conference hosted by Mercy Corps, to find out more about Mercy Corps microfinance programs and how the global economic crisis is impacting microfinance loans. Zhanna is the Executive Director of the Asian Credit Fund (ACF), headquartered in Almaty, Kazakhstan. Jim is Mercy Corps’ Financial Services Manager and works from UlaanBaatar, the capital city of Mongolia. Together, they have experience working in countries as diverse as Uzbekistan, Vietnam, Japan, Bosnia, Poland and Afghanistan.

Haley Dillan: Jim, tell me a little bit about Mercy Corps’ use of Microfinance.

Jim Anderson: Microfinance is an integral part of what we’re [Mercy Corps] doing as an agency. Mercy Corps works with a group of well-established MFIs to complement other programming. All these MFIs provide loans to individuals and small businesses, and in Mongolia and Indonesia our MFI affiliates also offer deposits. Many support agriculture and offer consumer loans for purposes like tuition payments and health care costs. A micro-loan can range from $65 to a Guatemalan woman raising chickens or piglets, to $7,000 for a Kazakh businessperson.

Microfinance is a great tool because, when managed correctly, it is sustainable. Projects can be established and continue on a sustainable basis: they don’t require ongoing injections of donor money. As the NGO, you create the legacy, and then it often continues independantly.

Haley: Why are the majority of loans extended to women?

Jim: Typically, women are the more common borrowers. From a broad source of statistics, women are more reliable borrowers. They invest their business profits to support the family — educating, feeding, housing, and providing health care for their children. As of this June, Kompanion in Kyrgyzstan had over 91,000 clients, of whom 98 percent were women. What’s the percentage for Asian Credit Fund, Zhanna?

Zhanna Zhakupova: About 93 percent of ACF loans are to women.

Jim: Yes, and the XacBank in Mongolia has over 63,000 clients, and women comprise about 55 percent of that. However, in certain countries, it’s not always clear that just because the borrower is a woman, she’s the one in charge of the money. In Afghanistan, for example, a female borrower may just give the loan money to her husband, and it’s hard to track that.

Zhanna: Also, men are less interested in small loans. When they think about business, they think about “big.” And after the global economic crisis, group lending has grown significantly, and women dominate group lending. Men are more reluctant to join groups.

Haley: What other impacts has the global economic crisis had on microfinance? Have you changed your lending criteria? Has it affected the ability for applicants to repay their loans?

Zhanna: As I mentioned, our portfolio has shifted towards group lending since 2008. So, yes, the global economic crisis definitely caused a shift in our lending. In Kazakhstan, the crisis has been quite severe. The GDP growth was averaging about 8 percent annually since 2000, from oil and mineral resources. A pretty strong middle class had emerged, especially in the two largest cities Almaty and Astana. The economic crisis really affected this middle class; the crisis led to a sharp decline in real estate and that hit a lot of people. It seemed like everyone had loans that were secured by real estate… and when the real estate bubble burst, MFI loans were under water.

The banks stopped lending, because real estate was the key piece of collateral for most people, and it has continued to fall in value. No one had sufficient assets to meet tougher bank requirements, and so couldn’t qualify for loans after the global economic crisis. Lenders accumulated loan repayments, but refused to relend that money, sitting on it instead of pumping it back into the economy. No liquidity — no lending — no economic development — falling living standards.

In the rural areas, lending was completely frozen. When I recently visited rural areas served by ACF, every village asked us to open a branch. Small loans were in big demand but no one was lending. Now, Asian Credit Fund has about $1 million dollars in group loans, with the average loan size at around $500 per person.

Haley: What's the difference between non-profit and for-profit microlending? Does Mercy Corps work with for-profit lenders?

Jim: Actually, microlending is for-profit in most areas of the world, particularly Latin America and Central Asia. Non-profit lenders are more often located in places like India and Bangladesh. So most of Mercy Corps' microfinance work is with for-profit MFIs, many of which source funding from for-profit socially responsible investors (SRIs).

If these SRI lenders were to calculate the true risk of the loans they’re extending to MFIs, the interest rate would be so unmanageably high — possibly 60 or 70 percent in places like Tajikistan or Afghanistan. But the individuals who invest with SRIs are willing to forgo a certain amount of return because they want to encourage social improvements by lending to developing countries. As a result, SRIs can lend to MFIs at affordable interest rates.

In order to help MFIs attract capital to expand and serve more clients, Mercy Corps utilizes various sources of investment, including equity and debt, typically with SRIs.

Haley: Is there an idea or sentiment that you are taking away from the conference?

Jim: At the conference participants included a diverse group of organizations, culturally, geographically and in terms of business models, yet we all face similar challenges and issues, and it’s great that we have an opportunity to come together and talk about that.

Zhanna: Yes, everyone was talking about development, and long-term goals.

Credit problems in the Indian city of Ramanagaram hint of a broader microfinance credit bubble, says a recent Wall Street Journal article. According to the article, part of the problem is that lenders are less concerned about alleviating poverty and more concerned about turning a profit.

Traditionally, microlenders were nonprofits focused on community service. In recent years, however, many of the larger microlending firms have registered with the Indian central bank as a type of for-profit finance company. That places them under greater regulatory scrutiny, but also gives them wider access to funding. This change opened the door to more private-equity money. Of the 54 private-equity deals (totaling $1.19 billion) in India's banking and finance sector in the past 18 months, microfinance accounted for 16 deals worth at least $245 million...

Protected by high interest rates, lenders are handing out loans without ensuring that the borrowers can repay. The excess of available funds and large number of lenders provide a opportunity for debtors to pay their interest by taking on yet more debt.

Many debtors in Ramanagaram have borrowed themselves into a trap. They take out new loans to pay the interest on existing loans — rather than investing the money or paying off the principal — and then find themselves unable to continue paying when the debt load grows too large. Lending procedures should prevent this from happening, but they haven't in Ramanagaram.

Take the example of the woman in this Wall Street Journal video. After borrowing $150 to invest in her husband's business, she took on four more loans, each to pay for the interest on the prior loan. She is now caught in a debt trap, her current debt is nearly equal to her annual income.

Lenders are responsible for checking if a borrower has excessive debt. But at least one admits to the Wall Street Journal that they only check with the largest of loans.

In Ramanagaram, over-borrowing is creating an anti-microfinance backlash. Civic leaders are questioning the value of microfinance and Islamic clerics are telling local Muslims to stop taking on microfinance loans.

Microfinance is still one of the only ways for the world's poor to access credit, a piece in the Economist reminds us. The vast majority of borrowers repay their loans. More stringent supervision of lenders should prevent a worsening of the crisis.

Women in SHGs spoke about bright futures for their daughters and want to work towards increasing the educational opportunities that are available to them in their village of Karauli. Photo: Carmina Rinker

I recently returned from a study and service-leaning trip in India. While was there I traveled with a small group of Portland State University students and faculty, visiting several grassroots NGOs working with women's microfinance groups in Maharashtra. In this part of the world, Self Help Groups (SHGs) go beyond lending, they also are tackling issues like domestic violence, health care and politics.

Sitting in matching blue Saris with gold trim, about ten women are seated inside a small room passing chai and biscuits to their foreign guests. They discuss their business ventures, their children, and ask our small group of American students questions about our lives in the United States. One mother is beaming with pride as she coaches her small daughter to recite a poem, "Airplane, Airplane" in perfect English.

With the growing popularity of Kiva.org and the heightened awareness of the Grameen bank, many of us Westerners are just now discovering the impact of microfinance programs as a tool of poverty alleviation and women's empowerment. But for hundreds of women in the village of Karauli in Maharashtra, India, this is old news. Women here have been active in Self Help Groups (SHGs) for close to a decade or more, and in this time their participation has extended far beyond the collective savings, loans, that are the most basic elements of microfinance schemes. Self Help Groups are groups of women who come together to save money collectively, and from their collective savings they can take individual loans in order to make repairs on their house, buy goods for their microenterprises, send their children to school, or for whatever purpose they need it for. In addition the SHGs act as a social support network through which the women can come together to address individual and broader social issues such as domestic violence, women's health, and sanitation issues in their communities. SHGs differ from Joint Liability Groups (as used by the Grameen Bank), in that they usually have about 10-20 members whose loans come directly from the group's own savings instead of from a bank or Microfinance Institution. In order to mobilize more credit for larger loans, groups of SHGs often come together to form a Federation.

While visiting two of thirty or so SHGs that are active in Karauli, a village with a population of around 7,000, women spoke about taking out loans to send their children to the university in the nearby city of Pune, large entrepreneurial ventures such as opening a hotel, and accumulating a collective group savings of Rs 8.5 lakhs (equivalent to about 17,000 US dollars). Yet beyond the financial benefit that these women enjoy through their participation in the SHGs (as well as the pride and confidence that goes along with it), the women also spoke about other changes that extend beyond their individual and family levels, and to their greater communities. This ranges from launching village clean-ups to rid their communities of litter, participating in village politics (panchayats). The women who have adopted the blue sari uniform to wear to their monthly meetings organized a 100 Woman March to the Office of the Minister of Irrigation of Maharastra to raise their concerns over water availability and sanitation. This group has been together for over eight years, and during that time every women in the room — about half of their 20 members — has served a term as SHG leader. They explain that before joining the SHG they had little to no interaction and involvement in public spaces, yet with the leadership skills they have now developed as well as the mutual trust and social capital that has been built through the group, they now feel less inhibited to be active in the public domain.

These SHGs have been organized and facilitated by the NGO Chaitanya, based in the nearby town of Rajgurunagar. Chaitanya came into existence in 1993, and began by incorporating microfinance programs using SHGs in rural areas. Today they have expanded to include many other programs that address issues of livelihood and agriculture, legal needs, education, and health of the rural poor.

Zahria, a 35-year-old mother of five, took out a loan from Afghanistan’s Mercy Corps-supported Ariana Financial Services to begin an almond-selling business. Photo: Miguel Samper/Mercy Corps

Our work to lend to the so-called "unbankable" is noted in September's O Magazine in a bit about Half the Sky. (The "O," of course, stands for Oprah.)

Mercy Corps-sponsored microfinance institutions reach more than 244,000 clients. Many of those are women in Afghanistan, where we founded Ariana Financial Services, a woman-led agency that has lent more than $11 million to 45,000 clients to date — nearly 75 percent of them women.

Mercy Corps is among several other organizations — including Hellen Keller International and American Assistance for Cambodia — mentioned in Half the Sky and noted in the O Magazine list for "Three Things You Can Do To Empower Women."

The article, unfortunately, isn't available online. But you can find it in the September issue of O, which is already at your local grocery-store or bookstore newsstand.

This piece was originally posted on One Table.

Photo: James Pradhan/Mercy Corps

If you want to understand how to fight poverty, ask poor people what it means to be poor.

That philosophy underlies the new World Bank book Moving Out of Poverty in India: Empowerment and Democracy. The authors of the book collected the life stories of thousands of Indian villagers who have experienced poverty.

Among other findings, the authors found that aid agencies should stop looking at the total number of the poor as a diagnostic and start looking at the numbers of those entering and those leaving poverty.

The report’s core finding, as identified by the authors, is that aid agencies should not track the total number of poor as a measure for success. Instead, aid workers should focus on the number of people escaping poverty and the number of people descending into poverty. These separate processes drive the overall poverty level and their causes are different.

The study found that villagers frequently descend into poverty because events force them to sell off their assets. Villagers told tales of people falling sick, family members dying, education bills coming due, weddings — all of which required the selling off of precious land. With the loss of land, or other assets, the villagers were less well off, and less prepared for the next catastrophe.

Villagers often escape poverty because their family members are able to help them. Family support is essential because few report access to credit from the private or non-profit sector. Extending credit opportunities through building new microfinance programs, extending financial institutions into the rural sector, providing public sector jobs, or other means, can help those who lack wealthier family members.

The study found that focusing on the overall poverty level can lead aid workers to address the wrong problems. Using the overall rate as a measure for success in poverty reduction can also be misleading. A static overall rate can, for example, hide great changes in those becoming better off and those becoming worse off, which combined would cancel each other out and leave the net poverty level unchanged.

"Peace from Rwanda." Photo: courtesy of Adam Bacher

Rwanda, 1994: Hundreds of thousands of people, mostly members of the Tutsi minority, are slaughtered by their ethnic Hutu neighbors in one of the worst genocides of the 20th century.

Today, the words "Hutu" and "Tutsi," once ripe with divisiveness and hatred, are no longer spoken on the streets of Rwanda. Reconciliation efforts have led perpetrators and survivors to work together to rebuild their common livelihoods.

Photographer Adam Bacher is documenting the efforts of this New Rwanda, giving readers of his blog a reason to be hopeful about the country's future. He provides a sweeping visual tour of reconciliation efforts, from a progressive rehabilitation center for former child soldiers, to a community-service program for former prisoners who rebuild the homes of survivors. He also documents programs meant to empower victims and rebuild the Rwandan economy. He visits a community-driven hospital construction project for infectious disease patients, and follows a non-profit that teaches vocational micro-business skills to children orphaned by the genocide.

The inspiration behind Bacher's work lies in the resilience of the Rwandan people:

Today Rwanda is an example of peace. The people have chosen not to allow themselves to become captive to decades of retributional killings. Distinctions between ethnic groups, political extremism, wide spread corruption, media manipulation, and other factors that led to the genocide have all but disappeared. Rwandans are working hard to reconcile their differences, and grow themselves out of poverty - toward peace and prosperity. They are an example to the world of what is possible.

A young girl walking on the outskirts of Kibera, the largest slum in Africa. Photo: subcomandanta (flickr)

More than $50 billion of foreign aid is given to African countries every year to address poverty on the continent. Although this may seem generous, and to some a solid strategy to treat Africa’s ailments, Dambisa Moyo — a Zambian economist with a background that includes Harvard, Oxford and Goldman Sachs — says just the opposite.

In her new book, Dead Aid: Why Aid is Not Working and How There is Another Way for Africa, Moyo claims that foreign aid has been "an unmitigated political, economic and humanitarian disaster.”

In a recent op-ed piece in the Wall Street Journal, Moyo writes that although she isn’t completely against humanitarian aid, she doesn’t believe "charity-based aid" can provide long-term sustainable development for Africa. Her biggest issue is with “government-to-government aid,” and funds from large monetary institutions like the World Bank. Moyo says the $60 trillion of this aid that's been given in the past 60 years is not working, evident from the fact that the number of Africans who live on less than $1 day has doubled in the last 20 years. And most foreign government aid, she argues, has been pocketed by corrupt politicians.

Trade, foreign investments and microfinance opportunities can provide a better future for Africans, Moyo said in an interview with the New York Times.

As expected, Dambisa Moyo’s claims have come under fire. In an interview with Newsweek, ONE Campaign co-founder Jamie Drummond says “Dead Aid” is “a poor polemic, with nothing new of substance, filled with anecdotal micro examples which ignore mountains of evidence." Madeleine Bunting from the Guardian calls Moyo’s claims “poorly argued” with “frequent pre-emptory glib conclusions.”

I wanted to get another perspective on Dambisa Moyo's assertions regarding the effects of foreign aid on Africa. So I asked Laura Miller — Program Officer for Central Africa at Mercy Corps — to respond to some of Moyo's claims based on her experience in the international-aid business, including stints in the Central African Republic and the Democratic Republic of the Congo.

This Sri Lankan woman was able to start a broom-making business with help from microfinance. Will the economic crisis limit these opportunities? Photo: Michael Foley: flickr

Microfinance institutions (MFIs) are going to be badly hurt by the global financial crisis. Or will they? Reports and opinions differ widely.

Some argue that the financial crisis has hampered small-scale lending.

One reason is that the value of local currencies are fluctuating too much, relative to more stable currencies like the U.S. dollar or Euro. Because of this, many MFIs are having to either seek new loans or convert existing loans into these "hard currencies." Over the course of these loans, many local currencies continue to devalue — leaving MFIs on the hook to make up the difference.

On top of this, interest rates on loans that MFIs need to fund their operations have increased. Survey findings reveal that 41 percent of MFIs are now taking loans at higher interest rates than before the economic crisis. Financial columnist Sarah Bauerle cites this as one of the crisis' "deleterious effects" on the microfinance industry.

Then there's the issue of available funds.

Roy Jacobowitz, managing director at the microfinance nonprofit ACCION International, says "a liquidity crisis is the very worst-case scenario for microfinance institutions."

Others say the credit crunch could actually be a good thing for MFIs, while some add that the funding spigot is still on.

"There is evidence that microfinance is resilient to global market movements, compared to traditional lending, as it falls outside of the mainstream economy. And there does still seem to be equity available for microfinance," says Mary Ellen Iskenderian, CEO of Women's World Banking.

Iskenderian cites India as an example, though it's worth noting that India is weathering the economic crisis incredibly well.

Investors are still banking on microfinance. The privately owned Oikocredit increased microfinance investment by 32 percent in 2008.

Muhammad Yunus, who pioneered microfinance in Bangladesh and won a Nobel Peace Prize for his efforts, remains optimistic. He said in October that he sees "good news in the middle of all these bad news: microfinance still works."

The Super MoneyMaker Pressure Pump by KickStart can irrigate up to 2 acres of land. Photo: KickStart

What does someone in poverty need most? Martin Fisher's answer: “A way to make more money.” Fisher is co-founder of KickStart, which pledges "a systematic approach to the end of poverty" by helping people create small enterprises selling simple but highly desirable tools like irrigation pumps.

He was recently named OneWorld.net’s person of the year, and gave an online interview with readers in which he challenges widely held views on poverty and the often incomplete ways we attempt to solve the issue of poverty.

Fisher says, "There is too much of 'us' giving 'them' what 'we' think 'they' need." For example, a women-only training program in a community with a lot of unemployed men, or solar-powered stoves that cause more problems than they solve. Fisher believes that the best way to lift people out of poverty is to help them start an enterprise. His website explains why giveaways don’t reach as many people and aren’t as efficient.

But Fisher isn’t just looking at how we address poverty, but how we measure our success:

“You want to reduce malaria? Great. But don't tell us about your success based only on the number of bed nets you gave out. That tells us nothing. Go out and measure the proper use of those nets. Measure the pre and post incidence of malaria and prove that you are cost effectively reducing the number of people suffering and dying from malaria.”

He even challenges microcredit firms to stop evaluating their success on the rate of loan repayment. If the businesses being created are really profitable, how profitable? Is it getting people out of poverty, or as Fisher says, "[is it] just making it a little easier for them to survive?"

Fisher says he's not trying to be harsh or confrontational; he's only trying to ensure that the resources go to where they are needed — to plans that will help to end poverty instead of just making it "less awful."

Read how Fisher distinguishes "Real Good" from "Feel Good."

Brazil is experiencing an economic boom. Photo: adam79 (flickr)

While much of the world fights off fears of recession and economic stagnation, Brazil is having an economic boom. Its steady growth rate has boosted production and has made Brazil a major player in world trade.

Brazil owes much of its new fortunes to its two burgeoning industries of oil and ethanol. Oil was recently discovered off the coast of Rio de Janeiro, which is estimated to hold between 5 to 8 billion barrels. With this discovery, foreign investment has been flooding into the country as companies try to develop this profitable resource.

Brazil is also experiencing windfall profits in agriculture, specifically ethanol. In recent months, ethanol has been gaining in popularity as an alternative fuel because of the rising cost of oil. Brazil, as the world’s largest exporter of ethanol, has greatly benefited from this rapid increase in demand.

Brazil has always been known as a country with a wide gap between the very rich and very poor. In 2004, the bottom 10 percent of the population received only 0.9 percent of the national income while the top 10 percent received 44.8 percent, according to UNDP figures. A surprising and encouraging result of this economic boom is that the gap is finally growing smaller. From 2001, Brazil's income inequality gap has shrunk 6 percentage points as more people moved up into the growing middle class. As well, the bottom 10 percent of Brazil’s population had a 58-percent increase in their incomes.

The government has played a major role in creating this upward social mobility in Brazil. They have used Brazil’s growing wealth to increase funding for many social programs for the poor. One very popular program is the Bolsa Familia program that gives small subsidies to help the poor buy food and other necessities. Millions of people have used this program to help lift themselves out of poverty and destitution. Once they are on a stable financial footing, many Brazilians have then applied for a microloan to start some type of business so that they can have a good income in Brazil's expanding formal economy.

These programs have been very successful in improving Brazil’s entire society. From 2004-2006 the number of people under the poverty line — earning less than $80 a month — decreased by 32 percent.

These statistics, at least, suggest that more and more Brazilians are able to climb out of poverty.

Photo: Sun Pictures / Lakshman (flickr)

Ever heard of a 13-year-old bank manager?

It’s not an uncommon sight at the Children’s Development Bank (CDB), a unique initiative by the Delhi-based NGO Butterflies that helps street children help themselves. CDB, founded in Delhi in 2001, offers street and working children the opportunity to invest in a different lifestyle.

Fear of theft and lack of future planning have often led working children to spend what little they earn on short-term pleasures, such as cigarettes or cinema tickets. By providing a safe place to hold money, however, CDB encourages them to start a savings habit.

CDB is particularly innovative in the way it is run. It works as a cooperative, in which children are both the owners and decision makers. Rules, membership standards and loan criteria are set by members who are all between the ages of eight and 18. The idea is for kids to "put money aside for themselves without worry that it will be lost or stolen, save for things that they need or want, such as clothes, (and) plan to improve themselves, by saving for education and training."

CDB now boasts more than 8,250 members and operates in 12 locations, including branches in Afghanistan, Bangladesh, Nepal and Sri Lanka.

Microfinance has worked in the developing world, but will it work here? Photo: PetroleumJelliffe (flickr)

A few weeks ago microfinance pioneer Professor Muhammad Yunus was in Queens, New York. No, he wasn’t soliciting funding or international support for his Bangladesh-based microlending institution. He was cutting the ribbon on the brand new Grameen Bank America building.

Thousands of miles away from the original Grameen Bank, the American version will function much like its Bangladeshi counterpart: loaning to groups of women rather than individuals. Like the women who first participated in Yunus’ innovative banking scheme, American borrowers will convene at one member’s house to collect weekly dues. This type of group-lending model increases accountability, since defaulting on your loan affects your peers' access to credit as well as your own.

The Grameen Bank targets women because they're more reliable borrowers. To date, Grameen America has loaned upwards of $250,000 dollars to more than 100 women who are using their $500 to $3,000 loans to establish or expand businesses ranging from floral arranging to house cleaning.

But Yunus has some skeptics to win over. Many question whether the Grameen model will resonate with Americans. Microfinance expert Saiful Islam says "Bangladeshis, Indians, Latinos will follow it, but I don’t know about others." In 1985, a similar program started by Yunus in rural Arkansas at the request of then-Governor Bill Clinton failed due to mistrust among participants, according to Shorebank's Mary Houghton, who helped advise the microfinance experiment in Arkansas.

It does seem somewhat of a strange fit: banking targeted to empower the poorest of the poor in one of the most prosperous countries in the world?

The United States does have its fair share of people living in poverty, however. Immigrants in particular have a hard time accessing credit and are more likely to use predatory lending agencies that charge steep interest rates. What's more, the Center for Financial Services and Innovation, reports that approximately 40 million American households are considered underbanked.

Also, contrary to public perception, microcredit is not aimed at the poorest of the poor. "It’s actually supposed to help those below a certain poverty line who are looking for self-employment as a route out of poverty," says Raj Desai of the Brookings Institution.

In that case, the U.S.-based bank may run into trouble. Approximately 1 out of every 11 Americans work for themselves, while about 1 in 4 in Bangladesh are self-employed.

Yunus will need time to prove that the American model can be successful. It may be that American women need more than greater financial access to climb out of poverty. But Yunus' large following and wide array of awards — including a Nobel Peace Prize — suggest he has a fighting chance.