The Inter-American Development Bank has approved $500,000 to provide credit and training for small entrepreneurs in the southern zone of Quito, capital of Ecuador.
The loan is expected to help about 2,000 Ecuadorans through a development program for "microenterprises," small operations of generally five workers or less, including family members. Such "micro-entrepreneurs" include street vendors, carpenters, seamstresses, and traders.
Often, these businesses do not usually have access to credit from banks and other lending institutions. They often depend on money lenders who charge exorbitant interest rates, leaving the entrepreneur in a cycle of poverty.
IDB's microenterprise program will extend credit, at lower rates than the money lenders, to small producers and train them how to efficiently administer their businesses. The loans will be executed by the Fundacion Ecuatoriana de Desarrollo, a nonprofit institution whose objective is to promote integrated development of low-income groups.
The bank also approved an $80,000 grant to provide technical assistance to program beneficiaries, as well as to buy teaching materials and equipment for training courses.
The financing and technical cooperation were extended by the Fund for Special Operations at a term of 40 years and a commission of 1 percent per year. It will be repaid through semiannual installments, the first of which will be due in 10 1/2 years.
Many microenterprise credit projects have extremely high repayment rates, in some cases as high as 98 percent. The Grameen Bank in Bangladesh, which lends money only to the very poor, has 226 branches and 156,000 borrowers, and a repayment rate of nearly 99 percent. The Badan Kredit Kecamatan Program in Indonesia and the Rural Banks of Ghana have also had very successful microenterprise programs. --