#### STICHTING BAKENS VERZET

#### 1018 AM AMSTERDAM, THE NETHERLANDS

Director,

T.E.(Terry) Manning,

Schoener 50,

1771 ED Wieringerwerf,

The Netherlands.

Tel: 0031-227-604128

Homepage: http://www.flowman.nl

E-mail: (nameatendofline)@xs4all.nl : bakensverzet

## MODEL FOR SUSTAINABLE SELF-FINANCING INTEGRATED RURAL AND POOR URBAN DEVELOPMENT FOR THE WORLD'S POOR

Incorporating innovative social, financial, economic, local administrative and productive structures, numerous renewable energy applications, with an important role for women in poverty alleviation in rural and poor urban environments.

"Money is not the key that opens the gates of the market but the bolt that bars them"

Gesell, Silvio The Natural Economic Order

Revised English edition, Peter Owen, London 1958, page 228

Edition 12: 31 October, 2007

(EN FRANÇAIS)

### 6.24 MICRO-CREDIT STRUCTURES

The following drawings and graphs form an integral part of this project proposal. They give an idea of what the results of the Moraisian organisational workshops setting the structures up might produce.

DRAWING OF INSTITUTIONAL STRUCTURES.
GRAPH SHOWING DEVELOPMENT OF MICRO-LOANS .
THE INTEREST-FREE LOAN CYCLE.
HOW THE ORIGINAL SEED LOAN MONEY IS USED.

The micro-credit system will be set up by the Moraisian organisation workshop conducted for the purpose.

The proposed micro-credit system will be different from those formed up till now. The loan capital repayments and longer term reserves within the project itself will be used to finance the micro-credit system. This is possible because the money is already available for multiple re-cycling, interest-free. When, at the close of the ten years' loan repayment period, the original project capital is repaid, the users will continue their monthly contributions to build up capital for system extensions and to replace the system hardware after 20-30 years. This money, which will build up to a considerable sum, also becomes available for interest-free micro-credits within the project area until it is needed.

Final repayments of blocks of micro-credits will be coordinated so that money for long term capital investment purposes (system replacement and extensions) will be available when it is needed. This way, money for the micro-credits granted is generated by the users themselves within the framework of the project and those micro-credits belong to the users. They are interest-free to ensure they continue to re-circulate within the local economy.

The Cooperative Local Development Bank will charge a set fee for each transaction to cover its costs and make a socially acceptable profit. The Cooperative Local Development Bank's fee will be set before the system starts working. The fee will be expressed in the local LETS currencies to stop leakage of money from the local economy. In any case associated such as collection of payments and distribution of information will all be paid for in the local LETS currencies.

The Cooperative Local Development Bank will thus become a regular member of the local LETS system. It could, for instance, use the LETS credits it derives from its banking services to buy local products and services and distribute them outside the system in exchange for formal currency.

The purpose of the planned Micro-Credit system is to ensure that individuals or cooperatives wanting to expand their production who have no access to formal currency to pay for their capital investment can get interest-free micro-credit loans to boost the local economy. The Micro-credit system is therefore applied only to micro-project investment which needs to be made outside the local currency exchange (LETS) systems.

The pay-back time for the interest free loans will vary from case to case. Some investments will generate more goods and services that can be sold outside the local LETS currency area than others. The formal currency so earned can then be used to repay the loans. The sale of some production in the formal economy will be a condition of the granting of the Micro-Credit loan. The speed at which the formal loan currency can be recovered will determine the payback period, which could therefore be anything between a few months and a few years. The loan repayments must be realistically possible. The system is cooperative and interest free and designed to enhance the general welfare within the beneficiary communities. As with the Grameen bank systems, any person or cooperative group wanting a Micro-Loan will be expected to produce four friends who agree to be jointly and severally liable for the periodic loan repayments, and to make sure they are made on time. Since the Micro-credits are essentially self-financed by the communities through their communal funds, the funding priorities must be left to the communities themselves. This is especially so where potential conflicts of interest arise because there is not enough funding immediately available to meet all requests for assistance. Meetings to discuss members' proposals and further developments with on-going projects will become a feature of the social life of the communities. Since it is expected that many of the beneficiaries under the scheme will be women and women's groups, women will need to have full representation during such meetings. One of the basic goals of the formation of the Community Health Clubs foreseen is to use them as a launching pad to create women's groups. These groups will give women the chance to discuss their needs, develop their priorities, and make submissions during the Micro-Credit meetings. The Health Clubs should also be able to ensure that women participate en bloc at the Micro-Credit meetings.

Rules for the organisation of the Micro-Credit meetings will be set up during the workshop with the full participation of the beneficiary communities. These rules must lay down the general principles behind the system. These would, for example, include:

1) All loans are to enable the beneficiary to extend his/her income by producing more goods and services
2) The goods and services must benefit the general interests of the community and encourage exchanges under the local LETS systems.
3) Some of the goods and services must be saleable outside the LETS systems to earn formal currency to repay the micro-loan.
4) The Micro-Credit loan must promote the rapid circulation of formal money within the beneficiary communities. For example, using formal currency to build a clinic or hospital would not qualify for micro-credits because the capital invested cannot be re-circulated. On the other hand, buying equipment for testing water quality (foreseen in the project) would qualify, as the formal currency cost can be recovered by charging in formal currency for water analyses conducted for users outside the project area.
5) Special priority will be given in the first instance to micro-loans to start the collection and transport of compost, urine, and grey water, and establish the recycling centres that will collect, store, and export non-organic waste products from the project area.

Forward: Gypsum composite manufacturing units.

Back: LETS structures.

Menu for group 6 work files: The phases of project execution.

Main menu for the project work file groups.

Complete index of the project work files.

Main menu for the Model.

Homepage Bakens Verzet