Small loans a big business

Clementine Uzabakiriho parlayed her first $36 loan into the seed money for her sorghum business in Rwanda.

Oak Brook-based Opportunity International arranged the loan through its Urwego Opportunity Micro-finance Bank in the east Africa country.

Reaching out from DuPage County, Opportunity International is at the heart of possibly the hottest trend in international banking, micro-financing. It involves loaning small sums, most often to women in Third World countries, in order to start sustainable businesses.

"The industry is attracting a new breed of investor who is results driven," said Knight Kiplinger, editor-in-chief of Kiplinger's Personal Finance magazine and also a donor. "Entrepreneurs from around the world, and places like Silicon Valley, are getting into these things. These are business people. These guys are not soft touches."

Micro-financing is also a tool being used to help the poor in U.S. cities. Local ties to the micro-financing market include Boston-based Accion International, which has offices in Chicago's Pilsen neighborhood.

With the average microloan size of $7,668 and interest rate of 12.5 percent in Chicago, Accion has lent to an electrical contractor, a printer, a jewelry store, a flea market business, a hair salon and a janitorial service.

"We focus on service and retail businesses that can't get loans," said Kate Rogers, vice president of marketing and lending at Accion in Chicago. "We do a lot of lending to immigrants."

Accion in Chicago has 1.3 million out making money with 175 loan packages.

Also, local access to microlending is available at the online lending site Kiva, which unlike Opportunity International can refund an investor's money.

Opportunity International is a faith-based group that takes donations from the likes of the Bill and Melinda Gates Foundation and uses the money to lend to people so poor they would have no access to cash.

"The money then has a multiplier effect, every $1 spent generates $1.63," said Don Ingle, a spokesman for Opportunity International.

Forbes magazine estimates microfinance funding tripled to $2 billion in 2006 from 12,000 microlending institutions.

"People who have money can spend more money," said Patricia Werhane, DePaul University's Wicklander Professor in Business Ethics.

DePaul has been hosting a series of lectures on poverty elimination by for-profit organizations.

The way it works for Opportunity International is that it seeks out groups of mostly women for loans. These "trust groups" of 20 to 30 women meet weekly with an Opportunity International-related representative who counsels them on their businesses.

Eighty five percent of its loan recipients are women, which is empowering to the female community, according to Opportunity International and the payback rate is 98 percent.

Like other micro-financiers, Opportunity International is morphing into other fields of financial security. Life and crop insurance are now offered to Third World businesses often beset by natural disasters.

Biometric mobile ATMs are going to remote villages encouraging savings and startup businesses. Cell phone use is encouraged for financial transactions.

Opportunity International alone has loans out to more than 1,300 businesses, helps insure 3.5 million people and managed to sign up 250,000 people and businesses for savings accounts.

"Watching someone open a savings account for the first time in their life, it really brings dignity to their lives," said Dennis Ripley, senior vice president of programming. "This is probably the most innovative micro-financing company in the world, with the most services for the poor."

Ripley, who recently returned from a trip to Ghana to view operations there, said he has a goal for the suburban organization.

"I want to see the last village and the last road in the poorest country in the world have access to financial services," Ripley said.