Sam Daley-Harris, Director Microcredit Summit Campaign March 7, 2009 Sao Paulo, Brazil

Of the 106 million people with a microloan in 2007 who were very poor when they took their first loan, 97 million were in Asia and a little more than 2 million were in Latin America.

My strategy was, whatever banks did, I did the opposite. Prof. Muhammad Yunus

Microfinance would never have existed if the rules of banking had not been broken.

Latin America Caribbean Microcredit Summit is June 8-10 in Cartagena, Colombia.

The session that was the biggest vote getter was this session: “Breaking the Rules of Microfinance to End Poverty: Innovations from Around the World.”

Jamii Bora is a Kenyan microfinance institution that has grown from lending money to 50 women beggars ten years ago in one of the worst slums of Nairobi to serving more than 200,000 members today.

Joyce Wairimu was one of the 50 women beggars who started Jamii Bora with founder Ingrid Munro in Wairimu has built six businesses and employs 62 people.

Wilson Maina was a thief, one of the most wanted criminals in Mathare Valley slum. Starting with a loan of $20, Maina has built four businesses and has convinced hundreds of youth to get out of crime.

When the beggars deposited their 50 cents Munro would give each of them two scoops of corn and one scoop of beans for free. She admits now that for those first two months she was tricking them into saving with the lure of free corn and beans. After two months, the bags were empty, but the beggars continued to save and the free corn and beans never returned.

On January 30 th the first 246 families moved out of the slums and into the newly created Kaputiei town with nearly 1,800 families to follow.

This is sub-sub-prime lending that works because in order to qualify for a mortgage the slum dweller have to have successfully repaid three micro- business loans.

Proposal I: There should be a Sao Paulo Declaration and another at the Ibo-American Summit where the former Presidents and the current Presidents of Latin America commit to having the region lead in successfully reaching and empowering the very poor with microfinance even beggars, thieves, and prostitutes in the worst slums and barrios of the region.

Proposals II and II: Create a regulatory framework that 1) allows microfinance institutions to accept and on lend deposits and 2) doesn’t require an ownership structure that pushes the microfinance institutions (MFIs) away from reaching the poor.

Proposal IV: On the issue of interest rates countries should “Legislate either the enforcement of declining balance interest rates (i.e. making "flat" interest rates illegal) or alternatively pass truth-in-lending legislation requiring all lenders to state the annual percentage rate (APR) of all loans purchased by their clients.

Proposal V: Create high quality national or sub-regional autonomous wholesale funds to 1) provide lower cost loan funds so MFIs can more easily serve rural areas and 2) build the MFIs’ capacity.

Other Proposals: 1) Promote private credit bureaus to generate more credit information from the microfinance sector and protect clients from over indebtedness; 2) Provide a regulatory framework that promotes transparency on the financial side and on the social side.

3) Do not allow governments to lend microfinance funds directly to clients; 4) Governments should create a facility to hold the foreign exchange risk of their own currency and thereby encourage much lower cost capital for MFIs; 5) Modify social security laws so the informal sector has access to social security.