FROM MICRO-CREDIT TO ENTREPRENEURSHIP: SUCCESS

UNCLAS SECTION 01 OF 02 DHAKA 006038 SIPDIS SIPDIS E.O. 12958: N/A TAGS: ECON EAID SOCI XD BG SUBJECT: FROM MICRO-CREDIT TO ENTREPRENEURSHIP: SUCCESS STORIES FROM BANGLADESH ¶1. SUMMARY: Citigroup Foundation, the philanthropic arm of Citigroup, recently presented its Second Annual Micro-Entrepreneurship Awards. Micro-credit is closely associated with Bangladesh, since Bangladesh was one of the first countries where the concept was widely employed to meet the financial needs of the poorest members of society. The stories of the award winners illustrate not only the individual winners' successes, but also how the concept works to lift people and entire communities out of poverty. END SUMMARY. BEST MICROFINANCE INSTITUTION -------------- ¶2. Illustrating just how micro-finance works, the Eco-Social Development Organization (ESDO) began in the wake of the 1988 flood and soon branched out into micro-credit. On a day-to-day basis, ESDO helps local groups organize to conduct training and collects small amounts from participants for savings. Once the idea of saving is established, small loans are made. Initial loans are usually in the BDT4,000 range (approximately US$60),but ESDO has made loans from BDT2,000 to BDT 200,000 (approximately US$30 to US$3000). The repayment rate for ESDO loans is 99%. BEST WOMAN MICROENTREPRENEUR -------------- ¶3. While many of these groups are oriented to women and the majority of the loans are made to women, several of the speakers at the event spoke about getting the loan "after seeking and obtaining permission from my husband". While this may be difficult for Westerners to hear, it shows that successful programs work with the existing culture wherever possible. The winner in this category was one such example. When Jahida Begum's husband was unable to find work, she took out a BDT 4,000 loan (approximately US $60) to rent a pond near her house to raise fish for sale as food. She was able to repay that loan, and take out a second loan for slightly more money and buy two goats. When they bred, she repaid and took out a third, larger, loan. This is the typical method - repayment, and a subsequent larger loan. Her most recent loan, after ten years, was for BDT 20,000 (over US $300) and she has diversified into various livestock, farmlands, and a restaurant. Her husband was very supportive in an interview, th anking Allah for this opportunity, and working with her in their diverse enterprises; but there is no doubt that she is �0A;the driving force behind their success. BEST PROGRAM FOR THE HARDCORE POOR -------------- ¶4. Given the level of poverty shown by all the nominees, it is sometimes difficult for an outsider to differentiate the hardcore poor from the merely poor. But at the lowest levels, there is the highest risk for trafficked persons, child labor, and women forced into prostitution. The winner of this category shows that micro-credit obeys the same economic laws as other commercial endeavors, and that there are ways to provide financial services at all levels. Rangpur Dinajpur Rural Services (RDRS) has provided 26,930 micro-credit customers with loans and has done so at 9% interest. This is remarkable, since the typical interest rate for micro-credit is 10%. RDRS has thus gained market share by undercutting other micro-credit institutions, providing access to even the most needy financial consumers, and still maintaining a 90% repayment rate. BEST MICROENTREPRENEUR -------------- ¶5. The winner in this category is a great example of how an entire community can be improved. From an initial loan of BDT 5,000 (approximately US $75) to buy a loom, Zakir Hossain has continued the upward spiral of repayment and larger loan to the point when his ninth loan was for BDT 275,000 (approximately US $4,230). He now owns over 80 looms, employs 120 weavers, his monthly payroll expense alone is over BDT 300,000, and he is diversifying into the food business by purchasing an oil press. But even beyond all this he has begun making small loans himself within his community, in some cases even to his own employees, for them to purchase their own looms and start up their own businesses. By his example, and by his own loans, he has DHAKA 00006038 002 OF 002 lifted his community up and given them the ability to achieve economic stability. MOST INNOVATIVE BUSINESS -------------- ¶6. When Nilufar Yasmin's husband lost his job in Dhaka making sports equipment and returned to her in their small village, they were in severe financial hardship. From a loan of BDT 4,000 (approximately US $65),she began utilizing local wood to make cricket bats and now operates a successful factory employing many people in the village. She has also gone through the loan/repayment/larger loan cycle five times since 2003, the latest being BDT 50,000 (approximately US $715). Her hopes for a bright future include her own saw mill to provide upstream supply chain management, and expanding from distributing cricket bats all over Bangladesh to distributing them worldwide. Showing her business acumen, she talks about the need to begin placing her own labels and stickers on the bats in the village, to create her own brand image. In a nice gesture, she was escorted to accept the award by the Captain of the Bangladesh National Cricket Team. CONCLUSION -------------- ¶7. Citigroup Foundation's stated goal of the award is to promote micro-enterprise, to recognize the success stories of the entrepreneurs, and to put the spotlight on local micro-entrepreneurs who are helping to lift the economic fortunes of their communities. Each winner received a plaque and a check for US $4,000, which coincidently was in most cases the amount of the initial loan they received; except the loan was in Bangladesh Taka, for approximately US $65. BUTENIS