wfn.org | [PCUSANEWS] Amity Foundation fights poverty in China with

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Note #8849 from PCUSA NEWS to PRESBYNEWS:

05424
August 18, 2005

Lending a hand

Amity Foundation fights poverty in China with penny-wise 'micro-credit'
program

by Katrin Fiedler
Amity Foundation

Editor's note: This fall the Amity Foundation celebrates 20 years of
evangelical and anti-poverty work in China. Through Amity, Chinese
Christians, with strong support from the Presbyterian Church (U.S.A.),
promote health, education and welfare, especially among China's rural poor.  
	   - Jerry L. Van Marter

NANJING, China - Looking at Wang Chunfeng's 50 head of sheep, it is hard to
believe that in the winter of 2001 she had just three ewes. But
straightforward lamb arithmetic - two lambs per sheep per year - adds up to
convincing proof that a small loan can pay big dividends.

	Wang, a farmer in her late 40s, bought those ewes with a $75 loan
from the Amity Foundation, through a  "micro-credit" program co-sponsored by
the Mennonite Central Committee and the Canadian International Development
Agency.

	Six months later, when it was time to repay the loan, she borrowed
from relatives. That's also when she decided to build up a flock rather than
sell her sheep for instant profit.

	For every pound of wool that she sells, Wang gets 12 cents. This
makes her woolly herd a soft cushion for hard times. Her family also grows
maize, potatoes and millet, and gets an occasional city job. But "without the
micro-finance program, I could never have started raising sheep," she says.

	The program in Shanxi's Zuoquan County is managed by Amity in
cooperation with the local Poverty Alleviation Bureau. Money is lent in
six-month cycles to borrowers who invest it in small money-making ventures.

	The program, supervised by local officers, is specifically for women,
who organize themselves into support groups that collectively guarantee the
loans. The women also take part in training sessions to brush up on
arithmetic and learn to write business plans.

	So far there has not been a single default, although borrowers must
pay 12 percent interest on their loans, which range from $75 to $240. The
high interest rate is typical of such programs, which use the income to
establish rural financial institutions, for long-term sustainability.

	The current micro-credit model is not perfect. Many borrowers
complain about the brevity of the loan cycles, which don't coincide with
agricultural growing cycles. For example, it takes nine months, three months
longer than the loan cycle, to fatten a pig for market.

	Wang Baocheng, who oversees the project for Amity, says: "Most
peasant households would like to receive their loans in the spring, as this
enables them to buy cattle at seasonally low prices and to resell later, just
prior to Chinese New Year, when prices for cattle are at their highest."

	Others wish larger loans were available. Sometimes, Baocheng says,
small loans do not allow meaningful investments and therefore don't make
money.

	Chunfeng's practice of borrowing from relatives to repay her loan,
rather than selling cheap for immediate income, is typical.

	While they often are intended to kick-start an income-generating
enterprise, micro-credit programs sometimes lead to the establishment of
rural "mini-banks" that extend credit to local farmers.

	Such programs produce cash flow that can give the local economy a
boost. In addition, the business training gives participants the tools they
need to become entrepreneurs.

	"Traditionally, farmers would only borrow money from friends and
family, in emergencies, or for a set of narrowly defined, socially accepted
purposes, such as weddings and funerals," Baocheng explains. "With the
practice of borrowing and lending money becoming widespread, peasants will
start to borrow ... for business purposes as well."

	Amity's operation in Zuoquan is the offspring of an earlier
micro-credit project in the province, says Yu Wen Youyu, Amity's partner in
the Poverty Alleviation Office. 

	"Shanxi had a government-initiated micro-credit program that failed,"
he says "It followed a different model, and was implemented in cooperation
with a bank. In contrast, the program run by Amity has been a great success.
We work exclusively with women, who constitute a 'weak' group within the
'weak' population of the poor; 100 percent of our borrowers return their
money, and we have profit rates of up to 30 percent per loan.

	"One of the main differences between the Canadian-Amity model and the
failed government program is the emphasis ... on personal development rather
than (just) taking a loan. To achieve this personal growth, you need a lot of
training, and training requires a lot of work."

	In recent months, the Chinese government has shown more interest in
providing small loans for farmers, and now encourages banks to offer "small
credit" services. But "small" loans under that scheme are beyond the reach of
China's peasant farmers.

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