"The concept of Credit for the Poor has had a tremendous impact and consequences for the poor all over the world. The most important element is to retain the sharp focus on the poor, and make sure that they are able to use their credit effectively for the sake of building a better future.

Poverty is the same all over the world. It means a lack of housing, health, education, work, justice, self-confidence, even love. Essentially, it is a lack of power and lack of opportunity. There are large and growing numbers of poor in Chile who are in need of microcredit. However, unlike Bangladesh, the impoverished in my country are urban based. The social context is very different for them from what I have seen here, and I feel that the type of people who will receive credit, the mode of operation and supervision of the program, will be different.

In Chile, almost 75% of the total fiscal budget is directed towards the welfare of those with limited income through an intricate social safety net comprising education, heath, housing, justice and so on. There are many subsidies available to them. However, due to the inefficiencies of the state administration of these funds, approximately 80 units out of every 100 units of resources allocated to the poor, do not reach the target population. The meagre 20 units that they do receive are not enough to address the problem of poverty. Thus, I believe they need more than welfare, even if the poverty situation in Chile is not as severe as in Bangladesh.

In Bangladesh, the predominance of Islam and cohesive moral values is a tremendous strength! In Chile, we have a huge problem with alcoholism among the poor households. In a family where the man is alcoholic, the entire family's condition deteriorates because of his addiction. When we are implementing microcredit in Chile, this is something we will have to tackle.

To fight poverty in Chile a group of concerned friends formed El Barco deo los Pobres Corporation (The Boat of the Poor Corporation), a non-government organization that is committed to empowering the poor through microcredit. At present, the organization is voluntary, and its members who are mostly young professionals and students, donate their time to become microcredit supervisors. The Corporation's operational and administrative expenses are borne by a foundation, set up five years ago for the purpose of helping the poor. The small amount of funding the Corporation has, is obtained through donations, and used exclusively for lending purposes. There is only one project office.

Credit is given within the 5-person group structure, mostly to women, after they have been evaluated as poor by Corporation indicators. These indicators deal with all aspects of the borrower's economic and social background: family income, education, housing, previous and current economic activity etc. The borrower must also elaborate on the intended use for the loan and number of payments required for repayment. The application then goes to a three-member credit committee who decides on the approval and conditions for the loan. This process takes no more than a week. Until one member's use of the loan has been approved, other members are not given loans, similar to GB method.
The maximum loan size will be 100,000 Chilean pesos (approx. US$ 140) over a one-year loan period. We have determined that this amount allows the borrower to purchase a wide array of goods such as tools, minor electrical equipment and raw materials for an income generating activity. We are still in the process of disbursing our first cycle of loans. The loans are followed up over the year, and we attempt to help the borrower with any distribution and marketing activities for the goods they produce. In the future, we are committed to providing short training programs on different issues such as production basics (i.e. cost of production, profit margin etc), social skills, money management etc. Several institutions are willing to provide this training to our borrowers on voluntary basis.

We are trying to keep our operations as simple and transparent as possible - the aim is not to diversify our products, but rather provide effective microcredit at the doorstep of the urban people. We still do not know what our repayment rate will be, or whether we will be sustainable in the long run. However, we are learning continuously and we are planning to implement Grameencredit with modifications to suit our environment.

In the future, as this organization takes a stronger institutional form, we can think of the following: adopting something similar to Grameen's Sixteen Decisions; promote group savings; implement a more organized training program for volunteer microcredit operators; raise borrower consciousness and disburse second time loans.

El Barco des los Pobres is committed to working to end poverty in Chile ! I am thankful to all at Grameen for the opportunity to see microcredit at the root level. I congratulate all at Grameen for their achievements towards our common cause: helping the poor !"

The commentary has been adapted from Senator del Mastro's report to The International Dialogue.
December 2002.