As our government takes action to deal with the economic downturn, we should not forget its consequences for those truly on the edge – 1.4 billion living on income of less that $1.25 per day. But the Microcredit Summit Campaign has announced remarkable – and it would appear sustainable – progress in addressing the issue of worldwide poverty.

Some 106 million of the world’s poorest families received a microloan (starting at $50 or less) in 2007, surpassing a goal set 10 years earlier. In 1997 microcredit was reaching fewer than 8 million of the very poorest.

The Grameen Bank, whose founder, Muhammad Yunus, was awarded a Nobel Peace Prize in 2006, reports that 64 percent of its clients who have been a borrower for at least five years have lifted their families out of poverty.

With this kind of economic success for its borrowers, it is not surprising that the bank has a 97 percent loan repayment rate, which is common for many other large microfinance institutions around the world. That’s a credit experience that banks in the developed world would love to have for “high risk” borrowers who borrow on an uncollateralized basis.

Also it is amazing to note that since 1995, the Grameen Bank has operated without any external funding, using loan repayments and the savings accounts of its clients to fund continued growth.

The leaders in Congress who have pledged to reform U.S. foreign assistance in order to increase its effectiveness and efficiency should be guided by the lessons of the successful microfinance lenders who have increased the social impact of their programs while maintaining high repayment rates. They have done it by focusing on the poorest, setting targets to achieve measurable economic and social outcomes, and monitoring progress to ensure results.

Ned Palmer

Manzanita Road