Charity sees hope in Third World ‘micro’ lending

Another Indianapolis institution has opened a bank. But don't look for a branch down the street.

The "micro lending" by Ambassadors for Children is evident only after a trek up the steep, tropical hillsides of
western El Salvador. In the village of Armenia, the Barahona Bautista family last month got a $246 loan to start a pig farm.

In the United States, that's the equivalent of a payday loan to sustain a working stiff for another week. But it's
mucho dinero in a country with a per capita income of barely $5,000. The Bautistas hope to turn the loan on which they pay
$12.30 a month into a better life, one in which they're better able to care for their paraplegic son.

As it is, the father doesn't make much as a woodworker. And one son's income as a mechanic's assistant doesn't
contribute much, either, to the financial needs of the eight-person family.

"It's not a lot of money. But, my goodness, if you would've seen how these people live," said Philip Goddard,
a member of Ambassadors' board, who returned from a visit to the tin-roof shacks in rural El Salvador last month. "It
doesn't take a lot of money."

Not in these rural villages.

"They don't have any income," per se, said Sally Brown, president and CEO of Ambassadors for Children.

Micro loans are new to Ambassadors, which assists children in more than a dozen countries. Such loans have been made in developing
countries for decades–often by international groups and some private banking firms hoping to cultivate dirt-poor entrepreneurs
into bankable customers.

But micro loans increasingly are becoming a buzzword in philanthropic circles. Just last year, Bangladeshi economist Muhammad
Yunus won the Nobel Peace Prize for the work of his Grameen Bank, which has been making micro loans in Bangladesh since the
1970s.

His obscure bank funded such modest purchases as cows and chickens, used by poor families to improve their standard of living.

"It's brought this front and center that people are having success with this," said Eugene Tempel, executive
director of the Center on Philanthropy at Indiana University. "You can see more foundations doing this. I know the Gates
Foundation is looking at this right now."

One advantage of micro lending, according to a 2004 report by Washington, D.C.-based Women For Women International, is that
female borrowers "can generate additional income through their enterprises and are more likely than men to direct it
to household expenses, particularly those [that] benefit children."

Diversifying assistance

Brown founded Ambassadors in 1998, while she was CEO of Ambassadair Travel Club, then a sister company of ATA Airlines. The
not-for-profit has, for the most part, delivered food, supplies and medical equipment. It's built schools and orphanages.

The most recently available tax records show that Ambassadors received direct public support and grants of $529,305 in 2004.
It spent $404,709 in program services, which do not include costs for fund raising, salaries and other expenses.

Ambassadors' crews of "voluntourists"–so named for combining service with recreational tours of countries–have
worked in more than a dozen countries and served an estimated 50,000 children. More than $3 million in assistance has gone
to children and their families, according to Ambassadors.

Brown said micro lending is a supplement to, but not a replacement for, Ambassadors' traditional delivery. She launches
a dizzying, rapid-fire recitation of current projects ranging from helping build a library at a Nepal orphanage to building
a school in Uganda to raising money for a health clinic in South Africa.

But she wants to extend Ambassador's micro lending–with a goal of funding at least 20 families a year. So far, Ambassadors
has spent about $4,000 on loans and related costs.

Brown also is looking at making micro loans in other countries Ambassadors serves, such as South Africa.

Ambassadors made its first micro loan last year, in Belize. A group of 15 women was given enough money to buy a couple of
sewing machines, fabric, thread and yarn. Now the women make uniforms for local schools and items for a local market.

"As the families slowly pay back the loans … the monies then go toward another loan for a family. It not only is sustainable,
but also creates pride of ownership and responsibility in helping the rest of the community," said Courtney Gorman, mission
coordinator for Ambassadors.

A partner in the lending project, Kiwanis International, has a volunteer in El Salvador who monitors progress and counsels
the budding entrepreneurs. Many would never be able to qualify for a traditional loan, said Goddard, whose day job is as deputy
director and chief counsel of the Indiana Department of Financial Institutions.

And many don't even know how a bank operates, for that matter, he said, noting turmoil in recent years that included
a civil war and a poverty rate most bankers would avoid like a leper colony.

Goddard said the concept of the micro loans is to try to "trigger" the idea that one can generate his or her own
income as an entrepreneur and increase self-reliance.

"It is a mechanism of generating income and everybody benefits. We're basically down to Economics 101 here. It's
a start and hopefully it will spread."

These folks don't know accounting. They don't have large cash reserves or a business plan, per se.

"It's almost," Goddard said, "like sending your kids down to the corner to start a lemonade stand."

Not a panacea

Some observers say the verdict is still out on micro lending.

Rashmi Dyal-Chand, a law professor at Northeastern University, in Boston, has even challenged the effectiveness of Yunus'
Grameen Bank. She wonders whether, in the long run, micro lending is more successful than welfare-style programs "in
lifting people permanently out of poverty."

"I think there are a number of very strong arguments that both infrastructure development and jobs development can do
better over the long run," she said. "We just don't know … . In the meantime, a lot of people are jumping
onto the [micro lending] bandwagon."

One problem, she said, is that micro lending to develop a small business can be complicated and requires understanding of
local economies and cultures.

"You definitely need to have local management of some kind," said Bruce Mac-Donald, of Accion International. The
Boston-based not-for-profit has provided $9.4 billion to nearly 4 million borrowers around the world since 1996.

Dyal-Chand said she was encouraged to hear that Ambassadors for Children was still maintaining its traditional outreach,
such as infrastructure improvements, while it dips a foot into micro lending.

One downside of micro lending, from a social perspective, is that it can put more pressure on traditional gender relations
in some cultures. A man might be less inclined to contribute to the household income if his wife becomes a successful entrepreneur,
according to Women for Women International. Men in such situations could also be emboldened to take another wife or to lash
out violently at their spouse.

Besides making micro loans, Brown wants Ambassadors to expand the number of chapters it has. Chapters are essentially local
clubs that help support her organization's short- and long-term projects. So far, Ambassadors has 19 chapters, including
those at Butler University, Indiana University and Purdue University and University High School. Others have grown out of
community groups from Ohio to Las Vegas.

Each person who belongs to a chapter pays Ambassadors $30 a year in dues. Some of these members travel on missions Ambassadors
sets up; others provide solely financial support.

"Our goal is to have 200 chapters," Brown said.

Earlier this month, Ambassadors bestowed its annual Peace Award to Crown Prince Alexander and Crown Princess Katherine of
Yugoslavia, who appeared in Indianapolis to receive it. Over the years, Ambassadors has provided assistance to that war torn-country,
including medical equipment for the royal couple's modernization program for Serbia's maternity rooms.