CBF Foundation and Microfinance

By Don Durham, former CBF Foundation President

For around $25 to $250 a woman in Asia, Africa, or Latin America can transform the lives of her family in nearly every way by starting a small business and providing the basic economic stability required for education, health, and hope.  Micro enterprise development has enjoyed a surge in popularity over the last few years and demonstrated itself as one of the only enduring strategies for helping people lift themselves out of abject poverty.  The most notable event in that rising popularity was the award of the Nobel Prize for Peace to Muhammad Yunus in 2006 for his pioneering work in micro enterprise development, a way of making small loans of investment capital available to industrious and entrepreneurial folk who don't qualify for traditional bank loans because they have neither assets titled in a form that could be used as collateral, nor any demonstrable cash income with which to repay.  Micro enterprise banks have found ways to lend money to these borrowers without using traditional collateral.  Loans are usually made at market rates of interest to insure that borrower's business models are sound when they graduate to traditional sources of capital.  Micro loan repayment rates range from 96 to 98% -- very respectable compared to commercial banks in the US.

Only the popularity is new.  Yunus and other pioneers have been refining the art and science of micro-finance (the mechanism through which capital is supplied to micro loan borrowers) for over thirty years around the world.  According to research conducted by Duetsche Bank, as of 2006 there were approximately 25 billion dollars worth of loans made to individuals who would not otherwise have been likely to be able to support themselves or their families.  That is remarkable growth which translates into more and more people having access to the capital they need to be productive caretakers of the families and homes with which God has entrusted them.

As remarkable as the global growth and effectiveness of micro enterprise development and micro-finance are, that isn't what gets my attention.  I hear more and more experts in micro-finance talking about a different statistic.  Even with $25 billion dollars invested in micro loans globally, there is still only enough capital available to satisfy 10% of the demand for loans by borrowers who would otherwise qualify for loans if the money were available.  The only reason most of these folks are poor is because they happened to be born in a part of the world that may be rich in many ways, but had very little to offer them in terms of economic stability.  90% of the poor who are ready, willing, and able to pull themselves up by their own bootstraps can't yet get access to a pair of boots.  That gets my attention.

I've worked as a fund raiser of one kind or another for over 15 years, so I can't help but start thinking about ways to get the other $250 billion.  It occurs to me that many churches and other Christian ministry organizations already have millions of dollars gathered up into endowment funds which they invest in stocks and bonds to provide a return so they can use the earnings as a permanent source of income to pay for ministry.  Actually, most of my time at CBF Foundation is spent helping organizations manage those very endowments.  What if there were a way to invest a portion of those endowments in micro loans so that the endowment principal would do as much good as the endowment proceeds?  That would make much needed capital available to poorer borrowers, while still earning a reasonably modest return to pay for the many vital ministries supported by existing endowments.

Another significant part of my time lately with CBF Foundation has been spent creating just such a mechanism.  The CBF Foundation board responded to a challenge by Daniel Vestal to explore ways to help CBF and others invest in micro enterprise development as one of the many ways Fellowship Baptists are seeking to be the Presence of Christ among the most neglected.  I hope you will consider having conversations in your churches and with the organizations most important to you about allocating a small portion of any investable funds you may have for investment in micro-finance.

We can all afford to help someone get a good sturdy pair of boots.  That's what's been on my mind.