C  R  S
Poverty Lending Principles


In 1997, as part of an agency-wide program quality agenda, Catholic Releif Services (CRS) microfinance practitioners came together and agreed on six principles that would guide the development of CRS' microfinance programming. These principles describe the common values underlying our current programming and provide guidelines for the development of future programming. In 1999, the principles were updated, as follows, to reflect lessons learned from our experiences:

Serve the poorest clients. Reflecting our agency purpose to promote social and economic justice, we target our services to the poorest communities and the poorest entrepreneurs. Women make up the majority of our clients, as they generally have the least means and the least access to credit.

Link loans to savings. We connect the size of a client's loan to the amount of that client's savings to ensure that our clients are building wealth as they borrow.

Use solidarity guarantees. Group-guaranteed loans replace collateral as a form of guarantee. Solidarity guarantees work by linking new loans to full repayment of old loans. A self-selected group of clients guarantees each other's loans with the understanding that no one in the group will receive a new loan until each member's previous loan is paid off. This social pressure to repay loans results in many microfinance programs having better repayment rates than commercial banks.

Practice participatory management. Clients are directly involved in the management and administration of the microfinance services they receive, from voting on loan applications to electing the management committee that runs meetings and handles day-to-day business. In this way, CRS guarantees the inclusion of those most affected by decisions in the decision-making process.

Invest up front to achieve scale and self-sufficiency. Investing in research, design, staffing and training from the beginning of a program is crucial to success. Achieving scale (reaching at least 5,000 clients per partner) advances our mission to serve the poor. We achieve self-sufficiency through efficient operations and by charging interest at market rates.

Plan for permanence. Prior to launching a new microfinance program, CRS plans the program's evolution into a sustainable resource for the poor. Permanence may include creating a formal financial institution, helping partners transform programs in to specialized microfinance institutions, or consolidating pilot activities into larger local entities.

Contact Address:

Catholic Relief Services
PQSD/Microfinance Unit
209 W. Fayette Street
Baltimore, MD 21201-3443, USA

Tel: 1-410-625-2220
Email: mu@catholicrelief.org
Web: http://www.catholicrelief.org/what/overseas/enterprise.cfm

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Hari Srinivas - hsrinivas@gdrc.org
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