The formal banking sector in Indonesia is crashing, but bankers to the poorest of the poor are finding that their incredibly high repayment rates are holding up.
''The bottom end of the economy - the so-called informal sector, is still functioning,'' said Larry Reed, chief executive of Opportunity Network, a non-profit microcredit lender, which has been getting money directly into the hands of the poor to create businesses and jobs for 27 years.''People still must have food and clothing,'' Mr. Reed said.
He said 95 percent of all loans are repaid, and then redistributed to help people grow their businesses or to help others start new businesses.
Mr. Reed is helping to develop a system of accreditation for the microcredit lending industry similar to the bank examination system used by the Federal Reserve.
''We want to set standards, have some type of on-site review and tracking of loan quality,'' he said.
At the microcredit summit in New York on June 26, Mr. Reed presented a framework for the 60 institutions in the industry to work under the same system. He called for the creation of an independent body to accredit institutions and make investors feel secure.
''The microcredit lending industry is counter-intuitive enough to begin with,'' Mr. Reed said.
Institutional investors cannot afford to look at and evaluate 10,000 programs to see which ones really work, he said.
The industry has announced its ambitious goal of providing loans to 100 million families worldwide by 2005.
''Attracting new funding to the sector will require performance of much higher quality,'' Mr. Reed said. ''microenterprise lenders will need to start thinking more like banks, as intermediaries of other people's money.''
Opportunity International, Oak Brook, Ill., the network's parent group, is involved with lending in 28 countries, with 59 local partners.
''Commercial banks will not loan money to the poor,'' said Charlie Kokmo, chief executive of Opportunity USA, the American division of the group. ''No one will make a loan on a commercial basis to someone who is totally untrained, has no resources and no collateral.''
Opportunity International not only is a lender of small loans, but a group of people who stay involved in the training of basic skills such as bookkeeping, cash flow and inventory control.
''We have proven that poor people will pay back loans and even generate profits,'' Mr. Reed said.
WITH GRAMEEN BANK
Monsanto Co., St. Louis, has joined with Grameen Bank to form the first microcredit technology initiative in Bangladesh.
The partnership will provide access to technology to very-low-income people in order to help them leapfrog traditional technologies and use appropriate, environmentally sensitive methods to improve living standards.
The Grameen Monsanto Center for Environmental-Friendly Technologies will be located in Dhaka, Bangladesh.
Grameen will provide access networks so that the poor can directly benefit from new technologies. For example, Grameen is already engaged in a significant initiative to provide cellular phones in the villages of Bangladesh through the intermediation of Grameen women.
The center ''will provide the opportunity to demonstrate how sustainable technologies, combined with microcredit, can transform peoples' lives, allowing them to improve their quality of life and the environment,'' said Robert Shapiro, Monsanto chairman and chief executive.
The center will be an umbrella organization for a number of new business initiatives. For example, an initial demonstration farm will conduct trials on corn, rice and cotton in an effort to make Bangladesh self-sufficient in these crops.
For more information, contact Jay Byrne at (314) 694-3670.
GROUP AIMS TO ASSIST
The Young Entrepreneurs' Organization, Alexandria, Va., has nearly 2,000 members in 60 chapters in 25 countries.
Members must be under the age of 40, be the founder, co-founder, owner or controlling shareholder of their company and have gross annual sales exceeding $1 million.
With the help of a $2 million grant from the Kauffman Center for Entrepreneurial Leadership, Kansas City, Mo., YEO expects to boost its membership to 5,000 over the next five years and develop more educational programs, said Keith Alper, YEO international president.
People in their 20s and early 30s have become a driving force in entrepreneurial growth in the United States. According to a study conducted by the National Federation of Independent Businesses, they started 1.9 million businesses in 1996, or 43 percent of start-ups in the country.
For more information, contact Brien Biondi, YEO executive director, at (703) 519-6700.
IFAC OFFERS HELP
FOR SMALL BUSINESSES
The International Federation of Accountants has produced two booklets for small and medium-sized enterprises.
''While in most countries SMEs provide the great majority of employment opportunities, they must deal with many legal and financial challenges in order to survive - many fail because of a lack of adequate financial management and control,'' said William McElroy, chairman of the IFAC's Financial and Management Accounting Committee, which released the booklets.
''In a majority of cases, these areas are neglected due to a lack of understanding and experience,'' he said.
The easy-to-read guide, ''Financial Management Fundamentals,'' assists managers of SMEs to better understand their business and its environment, the basic information needed to run a business and how to prepare a business plan.
The booklet is accompanies by a second publication, ''Financial Management - Doing it for Yourself,'' which uses simple charts and graphs to teach managers how to set up an internal reporting system to record their business's performance.
To obtain a copy, contact the IFAC Secretariat at (212) 286-9344 or visit the IFAC web site at www.ifac.org.