Microcredit: A Way off Welfare

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Micro-creditA Way off Welfare
Only thing we need to do soon, redesign our
institutions and policies. People can change
their own life provided they got the right kind
of Institutional support.
--Dr. Muhammad Yunus

• Evelyn Ackermann
• Dorrit Gordon
• Robb Henzi

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A Way Off Welfare
Proposal Offer micro-credit to qualifying
individuals as a tool to help them move away from
welfare to earning a living wage.
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Welfare in the US
U.S. Dept. of Health Human Services
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A Brief History of Micro-credit

• Initiated in 1976 by Muhammad Yunus Grameen Bank
• Focuses on providing women with a stable means of
  income
• Lending structure
• Support groups
• Training testing
• Repayment plan

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Growth of Micro-credit Lending
www.GrameenFoundation.org
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Growth of Micro-credit Borrowers
www.GrameenFoundation.org
Red Line Groups Blue Line Members
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Micro-credit in the USAn Urban Example

• ACCION national micro-lender
• Has lent over 154M to more than 16,000
  entrepreneurs
• Main offices in Boston, Miami, and Atlanta
• Network reaches into cities across the US such as
  Chicago, San Diego, and Houston
• Operates in service, manufacturing, artisan and
  other industries

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Micro-credit in the USA Rural Example

• Lakota Fund South Dakota
• Serves Native Americans of the Sioux Nation (Pine
  Ridge Reservation)
• Premise access to capital is the major roadblock
  to economic development
• Provides micro-loans, technical assistance and
  business development
• Typical project women make quilts

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Micro-credit Groups in the US

• Association for Enterprise Opportunity
• Womens Self-Employment Project
• Grameen Foundation
• - Project Enterprise, NYC
• - The PLAN Fund, Dallas
• Partner with Commercial Banks
• Microcredit Summit Campaign
• United Nations Populations Fund

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Macroeconomics of Micro-credit
Y AKaL1- a

• L? new workers enter labor force
• K? micro-loan recipients purchase equipment
• K/L? small-scale investment
• A? new laborers add production
• A/L? small-scale production
• Y increases due to increase in A, K L

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Challenges to Implementation

• Institutionalized barriers to borrowing money
• Earnings reduce welfare assistance
• Success of system could motivate reduction in
  public spending on social safety programs
• Excessive interest rates a problem
• Borrowers may default on loans

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A Way off Welfare

• Micro-credit
• Is a foundation for future personal economic
  growth through asset ownership
• Provides people with an opportunity to help
  themselves (self-employment where there is no
  other employment)
• Allows recipients to move up the economic ladder
  and gain new skills
• Preserves responsibility dignity and fits with
  the American spirit of capitalism
• Is not a handout

Project Enterprise Presentation
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Questions Answers