Daniel T'seleie
Northern News Services

Yellowknife (Apr 16/04) - There are billion-dollar banks and multi-million-dollar credit unions, but next might be a lender operating with a few hundred loonies.

Fatoumata Barry's micro credit work in Bolivia has been successful. Some think a similar set-up may have a place in the North, but it would be much harder to implement. - Daniel T'seleie/NNSL photo

The last "lender" is not yet available in Yellowknife, although the concept of "micro finance" -- essentially a community-run bank -- is big in the Third World.

Yellowknifers at Northern United Place recently heard all about micro finance from Fatoumata Barry's work in Bolivia where a "bank loan" of $100 can work wonders.

Two-thirds of Bolivia's population now lives below the national poverty line, according to the United Nations.

Barry -- a former financial analyst with TD Securities -- worked with the Bolivian non-government organization Foncresol through Canadian Crossroads International (CCI).

Her work was focused largely on women of rural areas and the formation of village banks.

A village bank is a form of micro credit union.

It is composed of people from a community who collectively handle a fund, which is lent out in small amounts at low interest rates.

With Foncresol, for example, the first loan can be no larger than US$100.

The loans are used by the people without a credit history or collateral to expand their earning capacity.

For example, someone may borrow $100 for supplies to make baskets which can be sold at the market.

Ideally the earnings are enough to pay back the loan without a loss in future revenue.

It has worked well, Barry said.

In some of Foncresol's village bank projects, 99 per cent of members paid back their loans.

Canada's big banks are not interested in such small amounts, but NWT people might be.

"Banks and other financial institutions are not willing to look at loans of $2,000 or less," said Cecile Cadieux, economic development coordinator with the Native Women's Association of the NWT.

Cadieux says there are many people in the NWT involved in arts and crafts who could benefit from small loans.

Money for work

She often meets artists or carvers who could increase their production and earnings if they had the money to buy power tools or new paint brushes.

A micro bank could benefit these people, Cadieux said, although it would be harder to set up in Yellowknife than most northern communities.

There's a certain trust involved that might be alive in small isolated communities, but not in Yellowknife.

"Some people just don't want to pay (back the loan)," Barry said.

A small hamlet would be able to, and want to, keep track of community members with loans because the entire community may depend on that loan's success, Barry said.

"If you don't pay (back the loan) then the other members are going to be responsible," Barry said.

This type of group dynamic helps keep members of Bolivian village banks accountable.

"It's trickier in Canada," said Dr. Jon Cohen, professor of economics at the University of Toronto. Cohen also sits on the board of Calmeadow, a Canadian organization involved with micro credit projects in Canada and around the world.

"Canada has a fairly robust safety net, which reduces the incentive to go out on your own," Cohen said.

That safety net also acts as a disincentive, Cohen said. Someone on social assistance receiving money from a village bank could have the amount of assistance they receive reduced by an equivalent number of dollars, leaving them back at square one.

Despite the troubles, Cohen says the ideas behind micro credit are sound.

Human capital

"A poor person might have human capital: some personal skills or abilities," Cohen said. These skills give them earning potential, but without credit they cannot get a loan to start a business. Just ask the big boys what that means. Credit history is key to any lending decision by a bank, said Mike Adamchick, manager of the Yellowknife branch of TD Canada Trust.

Poor credit history means a riskier loan for the bank, which is compensated for by higher interest rates, Adamchick explained.

He feels society needs to place more emphasis on credit.

"There have to be general banking programs for kids," Adamchick said.

There are many differences between Bolivia and Canada.

In Canada, five dollars won't get a business off the ground, but in Bolivia, "a five dollar difference (in ready cash) can be huge," Barry says.

But the principles remain the same, which convinces Barry there is room for micro credit in the NWT.