Give a man a fish, and he’ll eat for a day, teach a man to fish, and he’ll eat for a lifetime. Give him (or her) a small loan and basic training in small business management and you have joined the growing ranks of participants in the world of microfinance.

Although microfinance has been operating worldwide for more than three decades through the efforts of philanthropists and non-government organisations, it is only recently that it has really taken off in terms of size and global recognition.

The concept, also known as micro-enterprise development, was pioneered during the mid seventies by a number of visionary corporate figures who noticed that offering credit to the poor on the micro level was an effective and self-sustaining way of tackling the issue of poverty.

One such visionary was New Zealand born orphan turned multi-millionaire, David Bussau, co-founder of Opportunity International, a non-profit organisation that draws on funds from several western nations to provide banking and other services to needy people in 26 countries throughout Asia, Africa, Latin America and Eastern Europe.

Opportunity International Australia’s Queensland manager Bryan Barclay abandoned a lucrative management position with Paul’s dairy company to hop on the microfinance bandwagon after being “blown away” by a speech Bussau gave at a breakfast in Brisbane.

Proponents of microfinance see the inequity of access to loans at a reasonable rate of interest as the main obstacle preventing the several billion people living on less than A$2 a day from breaking out of the poverty cycle.

“What we do particularly appeals to business people, financiers and entrepreneurs. What we do resonates with them because when they provide us with funds, not only is it immediately tax deductible …they know that when they give, their money gets used very cleverly. It gets recycled. It gets loaned out repaid, loaned out, repaid,” Barclay said.

So what evidence is there that it is working? The United Nations Capital Development Fund determined in a series of impact studies that over the past five years the number of people with access has grown by 25-30 per cent per annum, and that their incomes grew by 25-40 per cent. According to a report by the United Nations Development Program, the proportion of people living on less than A$1 a day has dropped from 29 per cent to 23 per cent in the past ten years.

The growth of Opportunity International typifies the general growth in the industry. In 1998 they serviced 108,841 clients, lending a total of A$43.4 million. Last year’s annual report revealed the number of clients had climbed to 487,205, and the amount lent had surged to A$230.4 million.

Barclay uses the analogy of a rocket launch to describe this growth. For most of its existence, the organisation has been focused on establishing the infrastructure and resources required to “blast off”, as it has done in the past five years.

“In the last five years we have multiplied (the number of clients) by five, so it’s exponential. But at the same time it shows how the methodology is effective because …we’ve actually improved our efficiency and effectiveness by improving our repayment rate from 89 to 98 per cent,” he said.

Opportunity International delivers services by means of Trust Banks, community based groups of 15-30 (almost 90 per cent women) who meet regularly to apply for loans, make repayments and receive education in business practice and living skills. Membership and credit approval are determined by members’ votes and all clients must co-guarantee each other’s loans.

Success is a matter of degree. In Bali, Umi Salma’s meagre income of $2 a day from the sale of soft drinks allows her to work towards the goal of assisting her adult children who currently support her. By contrast, Palmira Maria, of East Timor, earns on average A$100 a day from her toy business, begun with a loan of just A$30.

It must be mentioned, however, that microfinance will not work in all cases.

In Thailand in the mid 90s Opportunity International found they could not attract skilled locals to their staff due to competition from better paying positions. The organisation also admits that extremely poor people with no stable income may only be pushed further into debt by taking on a loan they cannot repay.

University of Queensland PhD student Hong Son Nghiem studied the effectiveness of microfinance institutions in Vietnam, and his findings reiterate the need for such programs to charge a market rate of interest and to enforce the repayment

of loans to ensure success. He explained how the government owned Vietnam Bank for the Poor experienced limited success as a microfinance institution because it applied an insufficient rate of interest and allowed repayments to be delayed excessively.

What is perhaps most unique and intriguing about this form of humanitarian aid is that it creates the opportunity for the recipients to work towards their own success. This generates not only wealth, but also self-esteem. Increasing numbers of people and institutions worldwide are beginning to recognise that the world’s impoverished need, in the words of Opportunity International’s founder, David Bussau, “a hand up, not a hand out.”