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"Also with small credits, you can earn good money"

June 16, 2004

More and more Dutch Banks and investment funds invest in so called microfinance institutions. These are banks in third world countries that provide loans to small entrepreneurs. Microfinance works both ways: the financial institution helps to build a better world and there is a lot of money to be made. The interest rates for micro loans could be as high as 48% per year for a loan up to USD 400.

A pioneer in the field is Triodos Bank. Ten years ago, this bank in Zeist, who dedicates itself to "socially responsible and innovative banking”, started to finance microfinance institutions. The bank invests yearly over EUR 17 million in a network of third world banks spread over 25 countries. Banks as Triodos Bank could count on a yearly return of 10-15%.

One of the microfinance institutions, which are being sponsored by Triodos Bank, is Acleda Bank in Cambodia. Triodos owns 12% of the shares in this third world bank. Acleda Bank started in 1993 as a NGO and is now the third largest commercial bank in Cambodia. Acleda is a bit of an outsider in the banking field. While the other Cambodian banks focus on the larger companies in the capital Phnom Penh, Acleda bank concentrates on the small entrepreneurs in the rural areas. The bank offers loans, savings and money transfers.

Meanwhile ACLEDA Bank has 107,000 clients with a loan and 1,800 employees. Most of the clients cannot read or write and are interested to lend small amounts. They do not have any documents or a written business plan. But, according to the general manager, Mr. In Channy, who brought a flying visit to the Netherlands, that is not necessary: “They have their business plan in their head and that is what counts. We have faith in their plans. Our customers are being guided by our co-workers to determine the loan amount. The money is for example invested in small machines and material, but also in a basket to bring rice to the market”.

The average loan is USD 400. A yearly interest of 48% is charged. A phenomenal percentage for Dutch standards but not unreasonable according to Channy. “There is hardly any infrastructure in Cambodia, there is no telephone, there are hardly trains. Money and goods are scarce. Besides, these small entrepreneurs have to pay 10% interest per month with the so-called loan sharks. With that our rate pales into insignificance”.

Marilou van Golstein Brouwers from Triodos Bank ads: “One should not forget that the loaned amount often is doubled or tripled. It is all about small amounts. The operational costs weigh heavy then. In case the competition increases in this market, the interest rates will come down automatically. I know that from my own experience. In Bolivia there are 6 microfinance institutions by now, and the interest rate is around 25%. We would like to help the small entrepreneurs in developing countries but we would also like to make a profit on it ourselves. Besides if the people in those countries are satisfied, who am I to say that they pay too much?”

Source: Translation article "De Telegraaf", a Dutch Media.