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Aga Khan Expands Small Loan Network - 2005-02-23


Aga Khan has launched a new program to expand micro-credit projects to help some of the world's poorest peoples. The Aga Khan, who is the spiritual head of the Shia Ismaili Muslims and founder of the Aga Khan Development Network, says the projects will provide money for housing loans, education and other services aimed at improving the quality of life for poor people. Lisa Schlein reports for VOA from Geneva.

The Aga Khan Development Network has provided small loans to poor people for more than 60 years. A typical project might involve a loan of 50 dollars to a woman in Pakistan to buy a sewing machine. It has been shown that from these small loans, the woman is likely to expand her business and provide a better living for her family.

The Aga Khan says he has found poor people to be reliable, with only about two percent of loans not repaid. This is a smaller percentage than many small business portfolios of Western commercial banks.

While these small loans have helped millions of poor people in developing countries, the Aga Khan notes the businesses they start are still vulnerable. He says the death or serious injury of a family member, the loss of a crop or a natural disaster can wipe out the assets of borrowers overnight.

"Loans for education or health care can be important ways to break down barriers (that give access to) those services of the poor. I think it is known to all of you that the cost of access to social services in the developing world is growing rapidly, whether it be health care or education. And, therefore the issue is not only providing the services. The issue is making them accessible to the poor."

The Aga Khan says the poor will be better able to protect their assets if they can receive small loans to help them pay their hospital bill, mortgages or other debts. He says such special small loans will help prevent poor people from falling off the edge.

The president of the World Bank, James Wolfensohn, says the Aga Khan is taking the concept of these small loans, or micro-credits, to another level. He says once poor people start making some money, they need more financial products. He says they want insurance. They want savings for their children's education. But, he notes, these products are not easy to obtain.

"In most parts of sub-Saharan Africa, the average per capita expenditure per year on health is five dollars. So we are not talking about the sort of expenditure that you have in Switzerland or in the United States. But, for poor people, even to have protection to 50 or 100 dollars makes a difference. And, so we are seeking to develop these products so that poor people can have the advantage of the same range of financial products that rich people have. And, frankly, poor people need it much more."

The Aga Khan runs programs in 10 countries, including Afghanistan, Burkina Faso, Mozambique and Tajikistan. Next year the programs will be expanded into four other countries. He says his foundation is creating a new institution that will deliver innovative services, including micro-insurance, small housing loans, savings, education and health accounts.

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