Throughout history, credit has been a keystone in the development of wealth. From the Medicis to the Vanderbilts, the power of credit has been used to leverage resources for people with existing wealth. With Microcredit the power of credit is utilized at the grassroots level as loans to the poor without the 'Catch-22' requirement of collateral or previous credit experience. Microcredit institutions are proving to be a revolutionary force in enabling families to rise from poverty. From the rural villages of Asia to urban centers of the United States, small loans to emerging entrepreneurs create opportunities for self-employment and lives of dignity for millions. Loans to small businesses and individual entrepreneurs foster self-reliance and community-wide economic development. Small loans to families can also provide opportunities for education and training. The success of Microcredit has redefined international development policies which now embrace grass roots strategies to effect economic change.

Deutsche Bank has joined with progressive clients of its Private Bank to establish the Deutsche Bank Microcredit Development Fund as a unique financial tool fueling the growth and reach of Microcredit programs around the world. The Fund accomplishes this by fostering durable relationships between Microcredit institutions and local commercial financial institutions.

Microcredit experts agree that unless Microcredit institutions achieve mainstream status by becoming profitable businesses, they will fail to reach the necessary scale to truly affect change for the world's poor. Deutsche Bank Microcredit Development Fund (the "Fund") was conceived as a vehicle to combine the interest, abilities, reach and resources of Deutsche Bank and its private banking clients to support the long term sustainability of Microcredit institutions. The Fund's main objective is to encourage financial and operational self-sufficiency and to foster enduring relationships between Microcredit institutions and local commercial financial institutions.

The Fund provides loans to nonprofit Microcredit lending institutions or nonprofits that are evolving into regulated entities. These loans are intended to provid e equity-like debt that will be held by the Microcredit institution on its balance sheet to assist in capitalizing loan loss reserves, or to be used as collateral as part of obtaining a loan from a local financial institution on a leveraged basis. The Fund's loans are usually made on a non-amortizing basis with very low cost, usually 1-3% interest, over a 3-8 year term. Loans from the Fund cannot be used as working capital, or as funds for direct on-lending to program participants. Rather, loans from the Fund are intended to leverage capital from local commercial financial institutions for direct on-lending, enabling the targeted Microcredit programs to leverage conventional debt, grow their programs, and hopefully achieve the economies of scale needed to become self-sufficient.

Microcredit Development Working Group

Deutsche Bank Microfinance Working Group was formed in response to the Bank's recent adoption of microfinance as a cornerstone of its corporate citizenship strategy. The Working Group was launched in January 2001 with a global teleconference and presentation to Bank employees about microfinance and its effectiveness as a tool for the alleviation of poverty around the world. The main goal of the Working Group is to supply interested Bank employees with information about microfinance as an industry. Another objective is to present volunteer opportunities for interested individuals to become more involved in microfinance and to help broaden Deutsche Bank's role in this important emerging sector.

Approximately 200 Bank employees participated in the launch of the Working Group and learned that microfinance provides very small loans to the poor to enable them to achieve self-sufficiency through self-employment. Microcredit loans currently reach nearly 23 million borrowers with the industry growing rapidly. Microcredit institutions lending to the poor typically achieve repayment rates exceeding 97%. Since microfinance institutions and commercial banks uniquely complement each other, professional banking experience can help provide much needed assistance to the microfinance sector.

The Working Group also benefits from the in-house expertise of the Deutsche Bank Microcredit Development Fund, which has been making low-interest loans to microcredit institutions since 1998. Watch this site for periodic updates on the activities of the Working Group and the Deutsche Bank Microcredit Development Fund as well as for postings of key developments in the field of microfinance.

Why Social Investment Matters
DB Microcredit Development Fund Report of Activities