Small loans that make big gains

[Ccssgm]

IT has scored some stunning successes in developing countries such as Bangladesh, China and Indonesia.

 

Microcredit, which gives small loans to the poor, has helped them and the illiterate escape the poverty cycle. It gives them much-needed access to credit to set up their own businesses.

 

The Asia-Pacific Regional Microcredit Summit ends today.

 

Can microcredit work in first-world Singapore?

 

How microcredit works

 

MICROCREDIT, also called poverty lending, provides small loans to the very poor.

 

These loans can start from as little as US$20 ($27) to US$100 for first-time borrowers, and are usually used to start small businesses.

 

In most cases, no collateral is needed.

 

However, money tend to be directed at a group - ranging from five people to a whole village - in which members are accountable for one another.

 

So, when someone in the group defaults his repayment, the whole group will have problems getting further loans.

 

Under peer pressure to repay, borrowers default less.

 

Loans made by Grameen Bank, a Bangladeshi bank which pioneered microcredit, have a repayment rate of 98 per cent.

 

The 25-year-old bank has 7.5 million borrowers in its home country.

 

It earned US$15.85 million in 2005, and its founder Muhammad Yunus won the Nobel Peace Prize in 2006, for 'efforts to create economic and social development from below'.

 

YES, it can work here...

 

GIVE small loans to Singaporeans to set up hawker and pasar malam stalls, Mr Ang Mong Seng had said

 

The Member of Parliament for Hong Kah GRC had suggested that the microcredit system be adopted in Singapore during the Budget debate in February.

 

Give or lend money to the enterprising poor at low interest, so they can start simple businesses and be self-reliant, he had said.

 

He noted then that the Government gave $100 to $200 a month to the poor through Community Development Councils.

 

But a bigger amount of $800 to $1,000 could be offered instead for them to start a business, he argued.

 

Mr Ang told The New Paper that there are ways the Government can help microcredit programmes succeed here.

 

First, it can subsidise the loans.

 

However, he said Singapore should first test the viability of any microcredit programme by allowing experienced lenders such as Grameen Bank to run them without state help.

 

Second, the Government can set up low-rental marketplaces to provide microcredit borrowers with a cheap way to start a business.

 

United Overseas Bank economist Suan Teck Kin said microcredit can be used to help the poor start low-tech businesses, such as producing handicraft work, from home.

 

Ms Wong Chia Lee, a Singaporean independent consultant who has been working with microbanks in South-east Asia for the past 10 years, pointed out that religious and other self-help groups here could well be the closely-knit communities needed for microcredit to work.

 

These groups could be given loans in a way that makes their members accountable to one another - the same way microcredit loans are administered in other countries.

 

NO, it won't work here...

 

THE costs of running a business in Singapore are too high, financial experts said.

 

Mr Ben Fok, CEO of Grandtag Financial Consultancy, said: 'Our costs of living and services is one of the highest in Asia.

 

'That will make it harder to find a successful microcredit model.'

 

Agreeing, Mr Suan Teck Kin of United Overseas Bank singled out rental costs as one of the biggest obstacles for someone looking to set up a small business.

 

Another problem, consultant Wong Chia Lee pointed out, is the high level of regulation in Singapore.

 

In the microcredit programmes that she has helped set up in East Timor, people can immediately start using the money to sell kueh (cakes) or cosmetics door-to-door, or to sell vegetables on the streets.

 

'But the first thing someone in Singapore has to think of is the need to get a licence,' she said.

 

Ms Wong also said Singaporeans are not as entrepreneurial as people in some of the neighbouring countries.

 

'For microcredit to be successful,' she said, 'the borrowers need to have an idea of what they are going to do with the money first.

 

'But in Singapore, we virtually have entrepreneurship genetically engineered out of us.'

 

She recalled how a community support group asked for her advice on obtaining credit a few years ago.

 

When she met the group, she realised they did not have any idea what they wanted to do once they had the money.

 

This was in stark contrast to the microcredit borrowers she has worked with in the Philippines, Indonesia, and East Timor, who knew exactly what kind of businesses they wanted to do.

[Espire]

The reason being... in Singapore...

 

If you try something extraordinary... someone will be looking after u...

 

And if you fail.. you will have the whole country laughing at you...

 

And if you succeed.. "some people" will make something out of you...

 

All of us are being controlled wirelessly... to give them what they want...

Edited August 1, 2008 by Espire

[Chongster]

shall we lend Mr Ang $1000 to see what business he can start?

[Ccssgm]

Only Enough for Deposit the rental

[Chongster]

remember it has got to be immediately able to feed him and his family as well. cant cheat by using his 13k MP salary to do that.