New volume praises power of venture philanthropy

FWR Staff

15 March 2007

Microcredit, barefoot banking, and the business solution for ending poverty. On the heels of Muhammad Yunus' Nobel Prize win for his pioneering work in grassroots venture philanthropy comes a new book that examines microcredit from the donor's perspective.

A Billion Bootstraps: Microcredit, Barefoot Banking, and the Business, by Phil Smith and Eric Thurman -- with a foreword Yunus -- shows how microcredit can be a powerful tool for helping to end global poverty.

Microcredit is the extension of very small loans to poor entrepreneurs and to others living in poverty who lack the collateral, steady employment and verifiable credit history that most lending institutions want to see before they'll consider making a loan.

"Phil and Eric have done an admirable job showing what is happening, what is possible, and what we can do from their perspective as successful business people," Yunus writes in his introduction to A Billion Bootstraps.

Local heroes

Thurman, formerly CEO of Wayne, Pa.-based philanthropic investment consultancy Geneva Global, and Smith, a philanthropist and former energy executive, show how microcredit can earn better returns than any other philanthropic vehicle. They claim that it meliorates poverty more effectively -- and for longer periods -- than with any other philanthropic instrument. They also laud for being open to low- and middle-income donors instead of being an exclusive preserve of the wealthy.

Microcredit institutions, such as Yunus' Dhaka, Bangladesh-based Grameen Bank, provide very small loans to help families without loading them with debt. People use the loans to invest in small local businesses and services, becoming part of the solution for bigger and more complex economic problems.

"Ample research documents the fact that loan recipients are credit-worthy and repay their microloans at rates higher than rates reported by commercial banks - in part because their neighbors guarantee the small loans," write Thurman and Smith. "Poverty responds to the same investment principles that fuel business growth anywhere in the world."

A Billion Bootstraps advises donors to look for microcredit projects that offer transparency and measurable returns. One chapter also offers ways to connect with microcredit organizations. "Microcredit is not as simple as sending money and a half-page loan agreement to an entrepreneurial person in a faraway country," write Thurman and Smith.

"Once they have income and assets, they can provide for their own needs," says A Billion Boostraps. "Microcredit enables millions of people to lift themselves by their own bootstraps." -FWR