Microcredit

In 2006 the Brookings Institution documented what they called the "ghetto tax" or higher cost of living in low-income urban neighborhoods. A few examples:

·          Poor people are less likely to have bank accounts so they tend to cash their pay checks at check-cashing businesses which in cities surveyed charge $500 to $50 for a $500 check.

·          Low-income car buyers pay 2 percentage points more for a car loan than the more affluent buyers.

·          Low-income drivers pay more for car insurance. In New York, Baltimore, and Hartford, they pay an average $400 more a year to insure the exact same car and driver risk as wealthier drivers.

·          Poorer people pay an average of 1 percentage point more in mortgage interest.

·          Low-income folks are more likely to buy their furniture and appliances through pricey rent-to-own businesses. In Wisconsin, the study reports, a $200 rent-to-own TV set can cost $700 with interest included.

·          They are less likely to have access to large supermarkets and hence to rely on the more expensive and lower quality offerings of small grocery and convenience stores.

·          Without health insurance they use the emergency room which we all pay for.

·          Lacking the $1,000 for the first month's rent and security deposit for an apartment puts some in places like Days Inn for $40 a night.

·          If you are starting out it will cost about $40 capital investment to get your kitchenette up to speed.

·          Living in a motel, lacking a refrigerator and microwave the poor among us get their food at convenience stores or Wendy's or KFC. Expensive no matter where.

·          With lousy credit the poor pay a higher deposit for a phone.

·          Without health insurance the ER is where you take your children with an average visit of $1000 ten times more that a clinic pediatrician. Or you ignore the hypertension, mystery lump, diabetes until the bill exceeds $100,000.

·          $50 fee for check cashing services

Imagine how microcredit could help move families from motels and shelters to apartments.

If the term microcredit is not familiar to you the concept the extension of very small loans (microloans) to those in poverty. Individuals lacking collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit. Microcredit is a part of microfinance, which is the provision of a wider range of financial services to the very poor.

Microcredit is a financial innovation that is generally considered to have originated with the Grameen Bank in Bangladesh. In that country, it has enabled extremely impoverished people to engage in self-employment projects that allow them to generate an income and, in many cases, begin to build wealth and exit poverty. Due to the success of microcredit, many in the traditional banking industry have begun to realize that these microcredit borrowers should more correctly be categorized as pre-bankable; thus, microcredit is increasingly gaining credibility in the mainstream finance industry, and many traditional large finance organizations are contemplating microcredit projects as a source of future growth, even though almost everyone in larger development organizations discounted the likelihood of success of microcredit when it was begun.

God gave instructions for loaning money to the poor among His people while prohibiting charging interest: Exodus 22:25; Leviticus 25:36-37; Deuteronomy 23:19-20. How could it possibly be wrong for the church to do the same thing or for its members to provide the service?

 Talk about having an affect on the community.