Guaranteeing Growth for the Poor

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The most exciting strategy that we advocate here in Fooldom is Rule Breaker investing. It seeks out innovative companies with new technologies and new ways of doing things, aiming to invest in them early and profit handsomely if they really take off.

There are other kinds of Rule Breakers, though -- the non-profit kind, for example. Consider the Grameen Foundation, dedicated to eradicating poverty from our planet. Inspired by the work of Nobel Prize-winner Muhammad Yunus and his Grameen Bank in Bangladesh, Grameen Foundation supports microcredit organizations around the globe as they make tiny loans to people (typically women), enabling them to build businesses (such as selling milk or sewing) and lift their families out of poverty. (We've supported the Grameen Foundation many times, via our Foolanthropy campaigns.)

Grameen's latest venture is "Growth Guarantees." They're seeking not large investments, but sums of money offered as guarantees, permitting microfinance organizations to access commercial lenders and finance loans to the poor. Citigroup (NYSE: C  ) is one such guarantor. The program is innovative in that it uses a lot of leverage. Each dollar guaranteed can generate as much as four or more dollars in loans. In just two years, the program turned $20 million in guarantees into more than $112 million in loans. That's roughly 600,000 loans to the poor! (Learn more here.)

What to do
Depending on your financial circumstances, you might consider becoming a new donor-guarantor to support global microfinance. Instead of making a direct cash donation, you'll pledge some of your assets (such as stocks) as collateral to guarantee loans for at least a three-year period. You might alternatively offer a standby letter of credit from your bank.

Regardless of your financial sturdiness, you'd do well to learn more about microcredit. You might, for example, read Yunus' new book, Creating a World Without Poverty, which has been recommended in JPMorgan Chase's (NYSE: JPM  ) summer reading list. Many major companies are also getting involved in microcredit. Deutsche Bank (NYSE: DB  ) sees a $250 billion global demand for microfinance loans, 10 times more than has been loaned so far. IBM (NYSE: IBM  ) is working on developing software for microcredit enterprises. And Thomson Reuters (NYSE: TRI  ) has begun offering market news and prices to rural farmers in India and Bangladesh, for a modest price.

Whether you're looking at stocks or charities, consider seeking out organizations doing things in new ways.

Intrigued by the Rule Breaker philosophy? Test-drive, for free, our Motley Fool Rule Breakers newsletter, and you can read about every stock we've recommended in it.

Longtime Fool contributor Selena Maranjian owns shares of no company mentioned herein. JPMorgan Chase is a Motley Fool Income Investor pick. Thomson Reuters is a Motley Fool Inside Value recommendation. Try our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.

Read/Post Comments (5) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 13, 2008, at 3:15 PM, BradCushman wrote:

    This is a great article and a powerful way for the affluent to leverage their resources for social good.

  • Report this Comment On August 13, 2008, at 3:16 PM, pxpmary wrote:

    The short and happy history of modern microcredit is one of the brightest lights in an increasingly dim global economic picture. And it's hard to overstate the role women have played and are playing in making it work.

    In the first place, if my information is correct, Younus got the idea from village women, not the other way around. Beyond that, we see over and over again that women repay the loans at a far higher rate than men, and that loans to women strengthen families and communities far more than loans made to men. What better investment could anyone make?

  • Report this Comment On August 13, 2008, at 4:24 PM, levybr wrote:

    The practice of making loans to improverished women is a most important impetus to economic stability for the future. Women are unafraid of hard work and often need very little to get a business off the ground. This is a win win practice!

  • Report this Comment On August 13, 2008, at 7:11 PM, KateMarshall9999 wrote:

    It is refreshing to see the work of Yunus and of the Grameen Foundation. Microcredit is allowing poor women to retain their dignity, grow self-sufficient, and independent. The community grows stronger as the individuals engage in their businesses and encourage each other. It is such a hopeful solution to combatting our worst poverty around the world.

  • Report this Comment On August 19, 2008, at 10:40 AM, RogerDiS wrote:

    Grameen Foundation offers an exquisite response to the challenge of poverty: a simple solution to a complex problem. By empowering women in nations where a small sum of money goes a very long way, Grameen Fda is making the most of donors' generosity and concern. Finding this article on Fool was uplifting.

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Selena Maranjian

Selena Maranjian has been writing for the Fool since 1996 and covers basic investing and personal finance topics. She also prepares the Fool's syndicated newspaper column and has written or co-written a number of Fool books. For more financial and non-financial fare (as well as silly things), follow her on Twitter...

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