NEWS WIRE: Good Health Helps Microfinance Borrowers Repay Loans

Original news wire here

Global microfinance leaders met Wednesday in San Francisco to discuss a cutting-edge strategy to get the world’s poorest borrowers to repay their loans: Keep them healthy.

Philanthropists and anti-poverty experts who use microloans to help families buy a cow or a kiosk to lift themselves out of extreme poverty have noticed illness is the most common reason for default.

Freedom from Hunger, based in Davis, is funded by a $5.6 million grant from the Bill and Melinda Gates Foundation and is among a handful of nonprofits experimenting with health care microfinancing.

“Through lots of discussions with banks and microfinance institutions, they weren’t seeing an impact over time because people were using the microloans to pay for a sick kid instead of growing a business,” said Priya Jaisinghani, global development program officer for the Bill and Melinda Gates Foundation.

In 2007, Freedom from Hunger started its Microfinance and Health Protection Program at microfinance institutions in five nations, offering discount doctor visits, health care savings accounts, affordable medicines and emergency health care loans. In most cases, customers were required to attend health care classes in order to get the small business loan.

“We’re venturing out into new territory,” said Myka Reinsch Sinclair, Freedom from Hunger’s director of microfinance and health protection. “We wanted to go beyond health care education.”

The theory is that healthier borrowers will make better bank customers. They will repay their loans, come back for larger loans, and their startups will thrive, along with their families. The more they invest, the more the bank will have to lend to their neighbors.

Representatives from microfinance institutions in Bolivia, India, the Philippines, and the West African nations of Benin and Burkina Faso met at the Holiday Inn at Fisherman’s Wharf to compare notes from the pilot program’s first year.

Jaime Aristotle Alip, managing director of the Center for Agriculture and Rural Development, a Philippine bank network, said 15,000 rural families are now getting basic medical care.

“When we first talked to the doctors about offering discounted care, we got seven to sign up,” he said.

“Now there are 51 doctors. They don’t lose money because they get more patients this way.”

José Auad, general manager of the Crédito con Educación Rural, a Bolivian microfinance institution, said women are attending health seminars and using health care loans to pay for eyeglasses and minor surgeries. The average loan is $300.

“In order for this to be profitable, it has to go to a larger scale,” he said. “But we also realize there are social profits.”

Freedom from Hunger will continue its experiment through 2009 and share research findings with microfinance institutions worldwide.

E-mail Meredith May at mmay@sfchronicle.com.

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