Tiny Loans, Tremendous Returns: Tales from the Microlending Frontier

tiny loansSometimes, small gestures can make huge differences in people's lives and livelihoods. That's the premise -- and the power -- of microlending.

For proof, one need look no further than the stories of Marcia and Karen, two entrepreneurs in Costa Rica. They've both been given a leg up from Grameen Trust and Whole Foods Market's (WFM) Whole Planet Foundation.

If you're a Whole Foods shopper, you may have heard the buzz about its Whole Planet Foundation. The grocer recently launched its 2012 Prosperity Campaign, in which it is raising funds to help women like Marcia and Karen expand their businesses and improve their well-being.

Baking up a better life for $200

In her Costa Rican community, Marcia is renowned as "the best baker in town." But when some of her baking equipment broke, her home-based business -- and the much-needed income it provided -- was in jeopardy.

Marcia (pictured, with Evan Lambert of Whole Planet Foundation)


That's where Grameen Trust, which provides microloans to low-income entrepreneurs around the globe, came in.

The first loan Marcia received from Grameen Trust in Costa Rica was for $200 -- a figure that many American businesspeople would view as "chump change." But that tiny loan made a world of difference, helping Marcia buy a new mixer and get her baked goods back in the oven and back on the market.

With the help of her daughter, Marcia sells cakes like the one pictured, as well as many other tasty baked treats. The business is thriving: Marcia's sales have quadrupled in the last three years. She supports her family on the earnings from her bakery; and her health issues mean that her ability to work from her home is a real lifesaver.

Overachieving in Undergarments

Karen is another microlending success story. When she saw other women in her community building enterprises with loans from Grameen Trust, she realized it might possible to start her own dream business, too.

Grameen

Over three years' time, small loans have allowed Karen to build a business sewing men's and women's undergarments, which she sells locally. Her first $200 loan allowed her to buy cloth and raw materials to create her products. A second loan for $300 went toward buying a newer sewing machine that helps her make higher quality goods at a faster rate.

Karen has three children: Thanks to her home-based business, she can produce her merchandise while watching her kids.

Today, she's continuing to grow her skills and business, using higher quality materials for her wares and taking classes to further improve her handiwork.

What Will Women Do?

Most of Whole Planet Foundation-supported clients are women like Marcia and Karen. According to Grameen research, women business owners tend to use their profits to educate their children, improve their families' quality of living, and expand their businesses. Furthermore, they generally view paying back their borrowings as an empowering sign of financial progress.

Assuming that loans to low-income borrowers -- even in small amounts -- would never be paid back, most lenders have stayed far away from such customers. Grameen has found that the opposite is true: Between 95% and 98% of the loans the bank extends are paid back, according to the Foundation. That's a better rate of repayment than either student loans or credit card debts achieve in the U.S.

Marcia and Karen's stories show how "small" gestures -- minuscule dollar amounts in traditional banking -- can make a huge impact on someone's hopes and dreams for a better, more secure future. Nobody has to be a millionaire to help change the world and foster better outcomes. They just have to be willing to lend that helping hand.

As part of its current Prosperity Campaign, running till the end of March, Whole Foods has pledged $850,000 in funding to Grameen America. It's also inviting its customers to help by offering fundraising opportunities at stores across the country, as well as the opportunity to simply donate small amounts for small loans.

Motley Fool analyst Alyce Lomax owns shares of Whole Foods Market. Motley Fool newsletter services have recommended buying shares of Whole Foods Market.

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12 Comments

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pm0501

I've been doing this for years! I have a deal where if the loans aren't paid, a guy goes over to your house and breaks your knees if you don't pay. I also rent crutches at low weekly rates.

March 08 2012 at 11:16 PM Report abuse rate up rate down Reply
Bonnie

great story

March 08 2012 at 9:04 PM Report abuse rate up rate down Reply
ajt1025

Don't ever take a loan form a back in Delaware they can charge up to 400% interest. So many people have been screwed by Delaware laws that helps the banks make billions. That is why there are so many banks in Delaware.

March 08 2012 at 8:44 PM Report abuse rate up rate down Reply
rja3463

i started with 150 bucks and the government didnt even help...imagine that..government just get OUT OF THE WAY

March 08 2012 at 5:20 PM Report abuse rate up rate down Reply
pm0501

I've been doing this for years! I have a deal where if the loans aren't paid, a guy goes over to your house and breaks your knees if you don't pay. I also rent crutches at low weekly rates.

March 08 2012 at 1:06 PM Report abuse +2 rate up rate down Reply
judithkeys

I've been making micro loans of $25 each for several years to men and women entrepreneurs all over the world. These are LOANS, and they are re-paid. For more info, go to www.kiva.org and check out the variety of businesses that these micro loans support. I've been doing these loans for several years, and have never been stiffed. It is particularly important in countries where women are denied financial and legal rights to help them obtain the materials and equipment necessary to provide for themselves and their families. These are NOT HANDOUTS - - they are loans.

March 07 2012 at 9:32 PM Report abuse +3 rate up rate down Reply
2 replies to judithkeys's comment
Angelique Andrae

I've been making loans through Kiva also, Judith and my experience is the same as yours. Great stuff happening out there and it doesn't take much. A tiny bit of compassion goes a long way!

March 08 2012 at 8:40 AM Report abuse rate up rate down Reply
Jeri-Anne

Thanks Judith! I just went to their website and it's AMAZING!! I picked out three women, made my loans, and feel really great (-: I wish I could afford to do more, it was hard to pick from so many talented and motivated people!

March 08 2012 at 7:09 PM Report abuse rate up rate down Reply
midsi

Good report! Micro-loans are helping poor families' improve their lives all over the world. Americans can help them help themselves by contributing to FINCA International, World Council of Credit Unions, Accion, Kiva, and other trustworthy providers of microfinance services to poor families in Latin America, Africa, Asia, and even the USA! Give the hard working poor a chance to earn their way out of poverty, one small loan at a time. SMALL LOANS, BIG CHANGES!

March 07 2012 at 2:10 PM Report abuse +1 rate up rate down Reply
midsi

Good report! Micro-loans are helping poor families' improve their lives all over the world. Americans can help them help themselves by contributing to FINCA International, World Council of Credit Unions, Accion, Kiva, and other trustworthy providers of microfinance services to poor families in Latin America, Africa, Asia, and even the USA! Give the hard working poor a chance to earn their way out of poverty, one small loan at a time. SMALL LOANS, BIG CHANGES!

March 07 2012 at 2:08 PM Report abuse -2 rate up rate down Reply
midsi

Good report! Micro-loans are helping poor families' improve their lives all over the world. Americans can help them help themselves by contributing to FINCA International, World Council of Credit Unions, Accion, Kiva, and other trustworthy providers of microfinance services to poor families in Latin America, Africa, Asia, and even the USA! Give the hard working poor a chance to earn their way out of poverty, one small loan at a time. SMALL LOANS, BIG CHANGES!

March 07 2012 at 2:08 PM Report abuse -1 rate up rate down Reply
midsi

Good report! Micro-loans are helping poor families' improve their lives all over the world. Americans can help them help themselves by contributing to FINCA International, World Council of Credit Unions, Accion, Kiva, and other trustworthy providers of microfinance services to poor families in Latin America, Africa, Asia, and even the USA! Give the hard working poor a chance to earn their way out of poverty, one small loan at a time. SMALL LOANS, BIG CHANGES!

March 07 2012 at 11:39 AM Report abuse -1 rate up rate down Reply