'Village banks' easing plight of poor in Africa

Dollop by dollop, Albert Gwanzura wages his own battle against Zimbabwe's economic crisis by serving up lunchtime sadza (maize porridge) to office workers in the capital, Harare. In the third world, commercial banks do not risk lending money to small businesses such as Mr Gwanzura's. So he has turned to microcredit, which some people believe has the potential to eradicate poverty.

Dollop by dollop, Albert Gwanzura wages his own battle against Zimbabwe's economic crisis by serving up lunchtime sadza (maize porridge) to office workers in the capital, Harare. In the third world, commercial banks do not risk lending money to small businesses such as Mr Gwanzura's. So he has turned to microcredit, which some people believe has the potential to eradicate poverty.

Sitting next to his Coca-Cola fridge, Mr Gwanzura, 65, outlined how, in a year, he had turned a piece of waste land next to his nephew's car sales plot into a busy lunchtime takeaway business. Microcredit, backed by Western governments and charities, had been crucial, he said, but its limitations were proving frustrating.

"I started working on the idea of serving food from a caravan in this car park last year. Before then, I had been doing catering in the industrial area but I found that retrenchments and the increasing poverty of tobacco factory workers was severely affecting my sales. Many prices have doubled this year, so buying power is collapsing.

"In this area, our customers are office workers and bank staff," he said, pointing to a gleaming Mercedes whose driver was cruising in for a portion of sadza and beef stew - Z$45 (85p) - and a Coke - Z$14, up from Z$11 last Wednesday. "This is a better location for Broadway Catering but even here things are getting hard," he said.

Mr Gwanzura, a retired civil servant, started with two members of staff; now he has seven and serves 70 portions a day. It was through the microcredit Zambuko Trust that he got his first loan. "The commercial banks won't touch someone like me because I have no collateral. Anyway, their interest rates exceed 55 per cent," he said.

"Zambuko charges between 45 and 50 per cent, and they will accept your television as security. I started with them on a loan of Z$5,000 and now I am up to Z$20,000 ... But I could be doing a lot better if only they would give me a bigger loan."

The main criticism of microlending is that it creates a new class of poorish people - dynamic entrepreneurs who expand fast, then hit a glass ceiling that is still below the level at which commercial banks will help. This is not always the fault of the microlenders - Third World governments can be pressured by the major banks to use regulation to limit microlenders' scope.

Nevertheless, microcredit experts from all over the world who met in Harare this week were enthusiastic about the potential of "village banks". The experts said the loan system already reaches 2.6 million African families and many more in Latin America, where it has been operating for 15 years.

Zambuko Trust's director, David Tendani Kombanie, said he was aiming to give 50,000 loans by 2005. "One of the main advantages of microcredit is that it focuses on women. This means we have a repayment rate in the region of 94 per cent because 80 per cent of our clients are women," he said. His trust is principally backed by Opportunity International, the Australian government and USAid.

Mr Kombanie would like Zambuko to expand into rural areas but he also needs to keep down the cost of operations.

The disastrous state of Zimbabwe's economy, including the doubling of fuel and paraffin prices since June, worries him. "As yet we are not seeing our clients defaulting ... But clearly, the effects of the macro-economic environment will begin to have an impact on them in due course," he said.