Posted on May 26, 2009 - by Gavin

Business plan to tackle poverty…

The Press and Journal

Church considering cheap loans to help unemployed people realise their potential.

The Kirk is considering using a business model pioneered in the third world to tackle poverty in Scotland.

It is investigating the merits of investing in a company which will give low-interest loans to unemployed people who want to start up their own businesses.

The so-called micro credit scheme, successfully used in Bangladesh, would benefit those on welfare benefits who do not qualify for bank and building society loans.

The Church of Scotland-backed firm would allocate between £500 and £2,000 to a group of up to five people who want to set up ventures that do not require premises, such as hairdressing, child-minding and cleaning services.

The scheme, which would entail people taking collective responsibility for repaying loans, is operated successfully elsewhere in the UK and in New York to assist asylum seekers.

Ian Galloway, convener of the church and society council, said the initiative, which is in the early stages of planning, would tackle poverty by giving people an opportunity to realise their potential.

He added that they would be able to discover if they have the acumen to run their own businesses without losing any welfare benefits they get.

Mr Galloway said: “The way the scheme operates elsewhere is people get, without collateral, a relatively small amount of money for business start-ups.

“It operates in groups of five people who have collective responsibility to pay back the money. If one person does not, the others in the group have to pay their share.”

Mr Galloway said the Kirk hoped trusted members of communities would become involved in the scheme, to make sure that it was not abused.

He added: “You are relying on people’s sense of being able to depend on each other. This is not a licence for fly boys to make a buck.”

Mr Galloway said the Kirk hoped to team up with other organisations to help deliver the scheme, which enjoys a 98% loan repayment rate overseas.

Academics at Glasgow Caledonia University are working with economics professor Muhammad Yunus, who pioneered the scheme in Bangladesh, to examine how the initiative can be used in Scotland.

The Kirk is to contact the Scottish and UK governments to try to identify an appropriate area for a pilot scheme.

Source: http://www.pressandjournal.co.uk/Article.aspx/1232597?UserKey=