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The Extremely Poor Need Capital to Develop

Ethiopia, Africa

Capitalism requires capital. Providing new ways for the poor to access banking and to get small loans unleashes entrepreneurial energy and stokes development.

Complete Video Script

The very poor want the opportunity to work in order to break out of poverty. But without access to banking, they're excluded from the economy. Capitalism requires capital. And without capital, there's no development.

New opportunities in banking are bringing capital to people, and it's making a difference. Here in a crowded neighborhood of Addis Ababa, Lisa has organized her neighbors to create their own community bank — a cash box with two keys. Each woman banks a deposit each week and earns interest. They take turns borrowing from their common fund for business purposes. Thanks to this rudimentary banking service, this woman runs the neighborhood coffee shop.

NGOs are employing a clever system for "microlending." This phenomenon of making tiny loans, and then recycling the capital, is kick-starting small businesses, and speeding up development throughout the poor world. Back in Guatemala, I meet Señora Ana, who was able to start a beading business, and now employs dozens of workers.

Marta, who works with an organization that makes microloans to women, explains how microfinance is working here.

Marta: Microlending, it's a type of financing, but also with a social focus. That's what we do — we provide small loans to impoverished people, because people have no access to normal banks. And they need some funds to sustain their small businesses. Small like somebody who sells fruit in the street, or, say, shoes in the corner, so that's the financing we give them.

For us it's important to have not only the financing part, but also the education part — so we train them about business skills, budget, marketing, life skills. We grow with them.

We start from the beginning point. We want them to be successful. We have 98 percent payback — so it's working. People are very responsible — it's a hand up to these people, to make them empowered, and to be independent. First, we start with the women — provide the small seed to the women. These families work together.

The mother started first. She learned this beaded technique, and she taught her girls to do the same, and they after[wards] hired other people, as you can see, around — they work together. And the kids are around; they can take care of the kids here, and also, they employed several people — like this family — they employ 50 more people in the community, so they provide jobs and food on the table to other families here.

So, you're empowering one person, but this person makes a huge impact in her community by providing jobs. They can stay here — they can have can jobs here, have dignity, and raise a family.

With microlending, the same capital is used again and again. This Ethiopian woman got a loan to start a little store. When that cash was paid back, it was loaned again to help this man start his metalworking shop. This Guatemalan family got a loan for cows, which, when paid back, was loaned again so this family could start their rabbit business.

Experience has shown that these microloans are nearly always paid back, and they've helped millions of poor people work their way out of poverty.

In case after case, I saw the potential of empowering people whose desire is to work and produce. These are the success stories of smart and modern development aid.