Page last updated at 23:10 GMT, Thursday, 14 May 2009 00:10 UK

Big ambitions for small loans

By Katie Hunt
Business reporter, BBC News

Pro Mujer loan repayment meeting in Bolivia
Pro Mujer offers loans in Bolivia, Peru, Mexico, Nicaragua and Argentina

A teacher by training, Lynne Randolph Patterson never expected to find herself at the helm of a multi-national financial services company.

Twenty years ago, she was volunteering at a young mothers' club in La Paz, Bolivia, where her husband had been posted for work.

She was there to deliver empowerment lessons but the women, who attended twice a week in exchange for donated food, all told her one thing: "We need to earn money."

Along with her colleague, Carmen Velasco, a psychologist, they began to offer the women business training and tried to find them credit.

Inspired by Grameen Bank in Bangladesh, whose founder Muhammad Yunus pioneered microfinance, they began to offer small loans of around $50.

The women formed groups to guarantee each other's loans, and made simple business plans showing how they would invest and repay their first loans.

"Not being very financial, we made lots of mistakes in the beginning," she says.

But they persevered, and Pro Mujer (Pro Woman in Spanish) as their organisation is now called, now provides 222,000 women with loans, business training and healthcare in five Latin American countries.

Reliable borrowers

Ms Patterson travels the globe drumming up support for Pro Mujer's work - both from investors who want a decent return on their money and charitable organisations.

Lynne Randolph Patterson
When you come to a Pro Mujer centre, you not only get financial services, you get access healthcare services and social development
Lynne Randolph Patterson, founder Pro Mujer

"You need to invest in women if you want a better future for children," Ms Patterson says.

The hope is that the women use the loans to start and grow businesses such as food stalls, allowing them to better provide for their families.

Ms Patterson says the resources they are given helps women recognise their own value and achieve equality in their homes and communities. Many banks in developing countries do not lend to women.

However, it is not always smooth sailing.

She recalls one client whose husband beat her up because he thought she was having an affair when in fact she was attending Pro Mujer's weekly loan repayment meetings.

Often poorly educated and in precarious circumstances without collateral, the borrowers are surprisingly dependable. Pro Mujer says 99% of all loans are repaid.

But Pro Mujer's group lending method ensures that defaults are rare.

"If they don't pay the loans back, they can't remain members of the group," says Ms Patterson.

Rival players

These low default rates have attracted new players to the sector in recent years and microfinance has become increasingly commercialised.

Wal-Mart has set up a bank in Mexico to target those who can't access mainstream financial services and hedge funds and pension fund managers, now view microfinance as a viable investment.

What is microfinance?
Small loans around $100
Used to start and expand small businesses
Borrowers usually unable to get credit elsewhere
Providers range from charities to small commercial banks

"Lending to the poor has proven very profitable," says Ms Patterson.

As an industry veteran, she welcomes the increased scale of lending that commercial players can provide but says that the industry must guard against expanding too quickly as money pours in.

"What we all have to worry is over-indebtedness - look what happened to us."

Pro Mujer has no plans to abandon its social goals even though this may mean that its loans are more expensive than competitors.

"We are providing more than credit."

"When you come to a Pro Mujer centre, you not only get financial services, you get access healthcare services and social development," Ms Patterson says.

Expansion

Pro Mujer's business is now self sustaining in four of the five countries it operates - income from loans covers costs of service.

Susan Figuero, a Pro Mujer client in Argentina
The loans help women build livelihoods for themselves

Pro Mujer has hired new staff from major Wall Street banks to professionalise and help expand the business.

She hopes Pro Mujer will be able to triple the number of clients and increase lending the by the same degree

However, she acknowledges that microfinance is not a panacea for poverty and has its limits.

"I think being an entrepreneur is very hard. If there were jobs, with stable wages, that would be better but you do see incremental increases in our clients income."

"It's not perfect but it's hard to think of a more effective way to support women."

The Trouble With Working Women, a two-part special on women's issues in the workplace, is broadcast 18 and 19 May at 2100 BST on BBC Two.



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