Microfinance in Cusco, Peru :: The Aynikuy Program 2009
Of the 300,000 people in Peru, 37.7% live on less than US$1 per day. The typical salary in Peru is about $150 per month. Families cannot live on so little income, so many families have started very small businesses as street vendors, small libraries, hardware shops, grocery shops, etc. These entrepreneurs do not have easy access to needed capital to purchase inventory, or to expand and improve their businesses. Banks ask for collateral which people do not have, or charge interest rates that are too high.
"Aynikuy", in Quechua means to help each other or to cooperate. Aynikuy is also the name of The Mountain Fund's new micro-finance program in Peru.
Microfinance is one of the fastest ways to lift families out of poverty. It is also one of the best ways for small businesses to become successful and more stable. This is even more true lately - with the global economy suffering, microloans are a lost-cost and effective way to help thousands of small business owners worldwide. For donators, the benefit is two-fold: they can see their contribution recycled through the organization they are giving to.
The Aynikuy Program provides the jump-start necessary for families to achieve financial security. With that security, they are able to send their children on to school. This cycle of financial security leading to additional education is the most effective way to reduce poverty. With very little money, dozens of families can quickly get out of poverty and give the next generation a true and lasting start.
We have tested this program on the streets of Cusco for the past year. At present there are a total of 20 vendors obtaining loans. Aynikuy plans to raise $5000 US as a revolving loan fund to provide more micro-loans to these cart vendors. Each day a vendor may request a loan of up to $100 US from Aynikuy to stock their cart or store. Interest is at 7% and daily payments must be made on the loan. The entire loan balance is to be re-paid every month before additional credit can be obtained.
For more information on microlending, see this Forbes article from January 2008.
For the United Nations initiative on microlending, see their Capital Development website.
Mark Schreiner, of Washington University - St. Louis and the director of Microfinance Risk Management, published this scorecard for measuring poverty over time, thus helping to make microloans more effective. This framework is specific to Peru. More of his articles can be found here.
See also this Wikipedia biography of Amartya Sen, a pivotal figure in the development of microeconomics.
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