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Ben
Simmes
In developing countries, poor people are sys-tematically denied access to capital by financial institutions that cater exclusively to large businesses and affluent consumers. People who cannot read or write, who lack collateral as it is conventionally defined, and women as a class, are stigmatised as un-bankable. To keep their businesses going, small coffee farmers, fishermen, dairy farmers and vendors are forced to pay outrageous interest rates demanded by traditional money-lenders and loan sharks. They are trapped in a vicious cycle in which their financial means are drained away in burdensome debt and interest payments. Church representatives and individual church members decided 21 years ago to address this desperate need for grassroots credit by founding an investment society with participation from churches and people of good will: EDCS. Since then, EDCS has been able to support more than 300 groups of marginalised groups with credit.
The Ecumenical Development Co-operative Society was chartered as a co-operative society in The Netherlands in 1975. Since then, EDCS has developed financial partnerships with over 300 co-operatives, microfinance organisations and other institutions serving the poor. Currently, EDCS has 50 million U.S. dollars at work in the hands of low-income people in 69 countries. Average loan size is U.S.$ 250,000. Business is conducted through 14 regional offices staffed by people from the countries being served. The Board of EDCS consists of 16 members of which the majority are from the South. Half of them are women. CREDIT COMES FROM 'CREDO' EDCS has its roots in the ecumenical movement. In this context, it is good to realise that credit comes from credo. Credit is all about putting faith in people. People who are entitled to be believed in. People who were born to have their part in the Lord's promise. Taking them seriously is not a matter of charity but a matter of justice. The EDCS formula proved its worth over 20 years of giving credit to the poor. At the end of 1996, three out of every four dollars EDCS had invested in these so-called un-bankable people, consisted of repaid and recycled money. In other words: money which had been repaid by groups of disadvantaged people to whom no one would have given a dime has become recycled money, to be used time and again by people of equal capacities and equal strength. This is the astonishing record set during the last 20 years by the "monetarily poor". We must be careful not to downgrade poor people as if they were below the poverty line in all aspects of life, only because they lack money and have no access to capital. The so-called poor people that EDCS has served over the years never would have been able to climb out of their poverty trap, if they had not had the skills and the existential commitment to take their economic future and that of their children in their own hands. Provided someone would give them credit. SHARES IN DEVELOPMENT EDCS promotes self-reliance and sustainable development by investing in business enterprises of low-income and marginalised people, mostly in the Third World. At the start of the EDCS operations, the idea of giving loans to the poor was a breakthrough. Traditionally, development organisations were accustomed to giving grants. The loan concept was developed for both practical and philosophical reasons. Grants will always be needed for education, health care and relief. But when it comes to achieving economic productivity and self-reliance, loans are a better instrument while grants too often create permanent dependency. If a project is economically viable it does not need grants. Loans then more easily lead to sustainable development. This approach has got increased recognition from donor organisations like Bilance, ICCO, EZE, Church of Sweden Aid, etc. Because of the different expertise which is required to manage a loan portfolio, they have entrusted that role to EDCS. Also, in a loan relationship, both lender and borrower are business partners and rely on each other in a relationship of mutual respect. Pride and dignity take over from gratitude and dependency. MEMBERSHIP EDCS finances its loans and guarantees with share capital originating from its members. Churches and church-related organisations, as well as national an international congregations. The current membership stands at 350. EDCS membership is based on the principle of one member one vote irrespective of the size of share-holding. All others, individuals as well as local congregations, religious orders and other smaller church bodies, can participate in EDCS via Support Associations, who are a special category of direct members to EDCS. At the moment, EDCS has 25 Support Associations in Europe, the United States, Canada and Japan, but also in Third World countries such as the Philippines and Guatemala. WHY SUPPORT ASSOCIATIONS? Churches took the initiative to create an investment instrument directed at the interests of underprivileged people, but it was individual church members who actually gave EDCS its present strength. In the first years of EDCS, church treasurers were hesitant to invest in EDCS, because they had doubts on the feasibility of the concept of loans to the poor. Then individual church members said: "If the churches won't support EDCS, we will do it". They started volunteer groups, called them EDCS Support Associations and started investing their own money, money of their congregations and money of their parents and friends in EDCS. Today, there are 24 Support Associations representing more than 12,000 individual members, who have brought in 85 per cent of the present EDCS share capital of U.S.$ 100 million. This remarkable result is achieved thanks to the relentless efforts of thousands of volunteers who sacrificed their spare time organising church fairs, presentations, publications and forums, inspired by a vision of a more just economic order. One new, inspiring development was the start in 1994 of Support Associations in the South: in the Philippines, Guatemala and Mexico. In 1995 another one started in Letland, Eastern Europe. This is clear proof that EDCS is a world-wide coalition of those who can afford to save and those who are entitled to live. In 1995 one more channel was created for membership, the International Share Foundation. This Foundation operates as a kind of international support association and was started to enable interested donor-organisations, non-church institu-tions and individuals from countries where no support association exists, to participate in EDCS. DIVIDEND EDCS shares generate a maximum dividend of 2 per cent (The Netherlands tax authorities have granted EDCS freedom from corporation tax as long as the dividened is not higher than 2 per cent), payable in July. (The maximum 2 per cent dividend is paid over all shares which have been purchased prior to the 30th of June of the previous year. Shares purchased during the second half of the previous year are entitled to 50 per cent of that dividend). Over the past eight years EDCS has been able to declare this the maximum dividend of 2 per cent. Dividend is paid in cash or (fractions of) shares, at the shareholders' preference. EDCS investments function as an 'open fund'. The minimum participation in EDCS is with one share (U.S.$ 250.). At their request, members who want to reduce or end their share-holding will be repaid the nominal amount of their shares. As a rule, withdrawals below U.S.$ 1 million will be repaid upon request. For withdrawals in excess of U.S.$ 1 million, the Board can establish a repayment period of maximum five years. So far however, all repayment requests were honoured within ten days. RELUCTANCE In the early years of EDCS, many church treasurers were reluctant to invest in this new organisation. They doubted whether poor people in the Third World could or would repay a loan. Had exper-ience not shown that even grant-funded projects often failed? Over the years, the facts have proven them wrong. Looking back at more than 20 years of lending, EDCS can now demonstrate that 90 per cent of all distributed funds were repaid. True, in some cases it took more time than originally planned, but still, nine out of every 10 loan partners did eventually repay their loans, interest included! The community enterprises are living proof that giving credit to the poor is a sound investment, which produces sustainable results. The vision has become reality. Another objection of the church treasurers was that they felt that churches should try to get high financial returns of their investments. They said that churches have many obligations like paying salaries, subsidising numerous social activities and programmes and maintaining church buildings. This is well understood within EDCS circles. However, this does not imply that churches should not invest in EDCS at all. If they want to make their money work in line with their own mission, EDCS can be their instrument. Investing in EDCS is a moral decision, rather than a financial one. One example may illustrate this: an investment of U.S.$ 100.000 with a traditional bank may yield an average return of approximately 5 per cent. The same investment with EDCS yields 2 per cent. The difference is U.S.$ 3000 only! In other words: a church or congregation, which would be willing to support EDCS with U.S.$ 3000 per year as a gift, can reach the same goal by investing U.S.$ 100.000. Another example: in case 90 per cent of a church investment portfolio is invested at 5 per cent and 10 per cent is invested at 2 per cent, the average return is 4.7 per cent. That means that investing 10 per cent of the portfolio with EDCS 'costs' only 0.3 per cent. This means that turning "credo" into "credit" does not cost much but it definitely gives another colour to the investment portfolio of the Church, which by definition should be different from that of a 'normal' bank. For EDCS it is very important to be able to count on direct membership of churches, church organisations, congregations and religious organisations. Such direct support demonstrates that EDCS is being recognised by its founding mothers and fathers as an important alternative investment instrument for the churches. The "fingerprint" of the churches on the EDCS constituency will also encourage private investments of individual church members, to the benefit of productive enterprises of marginalised people all over the world. CHALLENGES TO CONGREGATIONS EDCS is an instrument the churches, and church-related organisations can be proud of. The experience has proven that an economic approach rooted in the liberating force of the Gospel leads to sustainable community development. The major challenges during the first 20 years of EDCS were to gain recognition and support from the churches, to mobilise funds to support the empowerment of the poor and to prove the viability of banking the "un-bankables". These challenges are still valid. EDCS is even today, not widely known as an investment instrument initiated by the Churches. CATHOLIC SUPPORT Many congregations and organisations as well as several Dioceses in European countries have been staunch supporters of EDCS right from the beginning. They have invested substantial amounts through EDCS Support Associations. This explains why the membership of the Catholic world is not evidently visible in the EDCS Annual Reports. People, who do not know these backgrounds, may easily come to the conclusion that EDCS is a Protestant institution, rather than a true ecumenical one. They may conclude that EDCS has no or hardly any links with the Roman Catholic Church. This is far from the truth. Most of the EDCS Regional Managers and two thirds of the EDCS Board of Directors belong to the Roman Catholic Church. The last two EDCS Presidents were both Roman Catholics. Dr. Mina Ramirez, director of the Asian Social Institute and member of the Pontifical Academy of Social Sciences, held the presidency for six years. Sr Frances Ryan, an Ursuline sister from Canada took thereafter h er place. Also a growing number of Roman Catholic bodies in the South have become EDCS members over the years. Furthermore, many of the groups that EDCS supports with credit, have roots in the Catholic Church. The challenge is to deepen the involvement of both Protestant and Catholic institutions. To achieve this aim, EDCS is most willing to dialogue about the developments within the organisation, to share results, difficulties, experiences and lessons to be learned. REACH OUT TO OTHERS Over the years, EDCS has gained more and more recognition in the South, from investors (Churches and church-organisations), from project partners, from development agencies, as well as from an ever increasing number of individuals in North and South. The membership is growing year after year, and share capital is growing beyond expectation: up to almost U.S.$ 100 million by the end of 1996. But the need for affordable credit is huge, everywhere in the world. To serve more and more groups of disadvantaged people, and support their empowerment, EDCS needs to continue reaching out to all those people who still do not know about EDCS and ask them to share in justice. This is necessary, to continue and expand the mission of banking the 'un-bankables', many of whom over the years have demonstrated their commitment to make their undertaking a success, to repay their loan, and to improve living conditions for their families. MAKE EDCS KNOWN TO THOSE WHO NEED LOANS To do this, we will need all the support we can get: therefore, we invite you to assist us, to share the story of this Church initiative within your own circles. An initiative which proves that churches, and individual church members are, in many ways, engaged to bring about justice in this world, to show that we believe that humankind is created after the image of God. Respecting the equal value of all human beings involves striving for an equitable distribution of power and welfare. The investment portfolio of Church institutions should reflect this belief. Congregations and religious orders have an extensive network all over the world with groups and organisations who possibly would be eligible for loans but who do not know about EDCS. EDCS has 14 regional managers located in regions in Africa, Asia and Latin America who could be approached by disadvantaged enterprises who are in need of credit. The challenge therefore is to assist us to disseminate information about EDCS and its mission to those who are interested and would like to avail of a loan. LINKAGES WITH SUPPORT ASSOCIATIONS IN NORTH AND SOUTH EDCS reaches out to Churches but also to individuals via the Support Associations. Congregations would contribute enormously by encouraging their members in the North, but especially in the South, to join the Support Association in their country, or (in countries where no Support Associations exist yet) to assist in starting one. Support Associations have proven to be of invaluable importance to EDCS. Not in the first place because Support Associations until today have been by far the largest investors, but more important still because of their important advocacy work. Hundreds of volunteers continuously work to change people's attitude towards money and savings. They stimulate public awareness regarding the unfair distribution of power and resources in the world where two thirds are poor and one third is rich. Fair trade, empowerment of poor and oppressed people, respect for human dignity as a right, not as a question of charity, are key-words in their advocacy programmes. This is work that deserves to be expanded world-wide. If you are interested to hear more about EDCS, please do not hesitate to contact us at our office in Amersfoort, the Netherlands. We will gladly provide you with more detailed information and explore poss-ibilities to co-operate in our joint mission to bring about a more just world.
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