The 500 people at the top of the world’s pay scale possess the same total wealth as the 416 million at the bottom, according to the 2005 United Nations Human Development Report.
Many theories and solutions have been advanced to deal with this chronic disparity. One of the most promising modern remedies appears to be very basic. It’s called microcredit, and its primary philosophy – helping people help themselves – is quintessentially Rotarian.
This idea is being put to work through Uniendo América, a microcredit program operated by Rotarians in Honduras. In 1997, The Rotary Foundation provided a US$500,000 Health, Hunger and Humanity Grant to establish microcredit in five Central American countries. Two years later, Honduran Rotarians worked to build the program in their country and created the Uniendo América Foundation with 11 Honduran and 19 North American Rotary clubs.
“In the beginning, CARE International showed us how to do microbanking,” says Julio Villalta, of the Rotary Club of Real de Minas-Tegucigalpa, who has been president of the Uniendo América board of directors since the program’s inception. “We opened 12 banks with them.”
If we just gave people money or allowed them to get behind, then we wouldn’t be training them for real life
- Julio Villalta, Rotary Club of Real de Minas-Tegucigalpa
Each bank has six to eight members, and for every 10 banks, Uniendo América employs one local coordinator, who’s trained to keep a record of the loans and the members’ payments. The coordinator is paid 0.5 percent of the interest collected.
Bank members pressure each other to pay on time, because if one person falls behind, the others aren't allowed to take out new loans. Anyone who fails to pay more than twice usually is asked to leave by the other members. Those who do pay get perks, such as secondhand clothes or toys for children – items that are often donated by Rotary clubs.
"If we just gave people money or allowed them to get behind, then we wouldn’t be training them for real life," explains Villalta.
Most loans are intended to help recipients build up an existing venture, so Honduran Rotarians also advise bank members on how to run a business. Participants often can increase their profit margin by up to 80 percent, mostly because they no longer have to make steep interest payments to loan sharks. “It frees them from living day to day,” adds Villalta.
Because Uniendo América’s operating banks in Honduras are self-sufficient, grant money, which usually comes from Rotary Foundation Matching Grants, is used to start new banks and pay the program’s two full-time employees. All seven members of Uniendo América’s board of directors are Rotarians.
So far, Uniendo América has provided loans to nearly 1,000 families.
“We are not a bank that is charging them interest to be profitable, but we are instead a bank with a heart. When we hear about a success story… that is the moral payment that we are looking for, and that is how we are making a difference,” Villalta says.