A History of Microfinance:

Microfinance finds its birth following WWII in the developing influence of Non
Governmental Organizations (NGOs), and has over the past few decades seen a significant
increase among various global markets. Essentially, microfinance is the practice whereby
organizations (namely charitable and financial) help poor households and individuals gain
access to loanable funds in order to boost and support both personal and community
economic development. These individuals and households typically don’t have access to
traditional forms of banking and lending institutions for a variety of reasons. Microfinance
Institutions (MFIs) seek to provide a bridge of support as well as a catalyst to boost
personal and economic development among the world’s poor.

The Practice of Microfinance:

Currently over 1billion people worldwide live with an income of less than $1 per day, and
close to 3billion live with an income under $2 per day. This means close to half the world’s
population is living in dire poverty, and most without hope of change. The majority are
stuck in a vicious cycle because most operate in a subsistence lifestyle, and have relatively
no chance of gaining access to formal economic markets, developed industries, or financial
security.

The practice of microfinance is essentially “small finance” in which specific efforts are
directed towards those who otherwise would have no access to financial assistance. MFIs
provide micro loans to individuals and families to help grow businesses, buy farm
equipment, educate children, or provide medical care. These are people who never would
be able to secure a $10,000 plus loan at a traditional lending institution; but ultimately,
these families don’t need that amount of cash. A small loan in the amount of $100 or $500
at low interest rates would work wonders in helping the family, and boosting economic
growth.

The Impact of Microfinance

Although microfinancial institutions operate through creating relatively insignificant loans in

terms of monetary amounts, the impact of these institutions is quite large. Vinod Khosla,
co-founder of Sun Microsystems remarked, “Microfinance is the most influential financial
practice in the last 50 years”. MFIs have had a significant impact on the development of
underprivileged and impoverished areas. The Grameen Bank in Bangladesh, the pioneer
microfinance bank and one of the most successful, has reached over three million
individuals since its inception in the 1970s. Current reports dictate almost $4 billion
dispersed among its members over the past few decades making the Bank equal in terms
with many corporate financial institutions in the financial hubs of the world. These funds
have allowed several million dollars to flow into various Bangladeshi markets that would
otherwise have been non-existent—and many of the loans were as small as $35.

Imagine a family living in a rural, impoverished area surviving on less than $2 per day.
What would a small loan of $50 or $100 be able to achieve? Over 65% of the world’s poor
currently practice subsistence farming as the primary means of survival. With a small loan
this family might be able to buy farm equipment to turn the family farm into a small
business; or hand-woven goods might be able to gain access into a formal market in the
city. A small loan of $50 or $100 might seem insignificant to most of the developed world,
but to close to half of the world’s population, it is a life-changing gift.

Faith-Based Microfinance:

At the beginning the new millennium, The United States Agency for International
Development stated that a large constituency of its most influential NGOs (a majority of
which participate in microfinancial activity) would come from the faith-based sector. Now
six years later, faith-based organizations are among the most successful charitable
development agencies in the world. World Vision leads the way in an effective approach to
poverty reduction, economic, and socio-cultural development. In 2003 alone World Vision
served over 100million people, employed 20,000 staff members worldwide, and distributed
$1.25billion in cash and agricultural goods.

Another faith-based organization, Opportunity International, saw its influence skyrocket as

it began to implement additional programs into its model. In 2003 alone, Opportunity
International reached over 30 nations, loaned out over $160million and experienced 35%
annual growth rate over the past five years. Along with traditional microfinancial practices,
Opportunity International participates in poverty alleviation strategies including education
and healthcare that complement their traditional policies.

The Soteria Foundation Approach:

So why The Soteria Foundation? As the need for microfinance practices continues to grow
worldwide, the greater need for the Gospel of Jesus Christ is just as essential. MFIs are
leading the charge to help reduce poverty and in addition faith-based MFIs are spreading
the Gospel along with cash. But what continues to be lacking among even the more
successful faith-based organizations is the importance of, and the development of local
churches.

Poverty reduction, missionary outreach, and helping the poor are all biblical precedents.
But none are ever discussed outside the context of the local church. The local church is the
conduit for spiritual growth, supernatural grace, and selfless outreach. Although
microfinance practices are successful on their own, how much more could be reached both
financially, but more importantly spiritually through local churches?

The Soteria Foundation believes in the biblical precedent of the local church as the
foundation of development outreach. In the Foundation’s socio-economic model, the
distribution of funds, fiduciary accountability, and risk assessment is overseen by Soteria
Foundation officers through the local church. Church leadership will identify families and
individuals who have proven themselves faithful, and the local church itself will act as a co-
signer on all loanable funds. Initial loans will be limited in amount, and allowed to grow as
families and individuals show faithfulness in paying back funds. All prospective loan
recipients will be required to participate in financial education courses offered through the
local church, and hands on financial education and assistance will be available throughout
the entire process. Interests rates will be kept low but competitive in order to encourage
responsibility without burdening families in debt.

The ultimate goal is to proclaim Jesus Christ and Him crucified. I John 3:16 says, “By this
we know love, that he laid down his life for us, and we ought to lay down our lives for the
brothers. But if anyone has the world's goods and sees his brother in need, yet closes his
heart against him, how does God's love abide in him? Little children, let us not love in
word or talk but in deed and in truth.” Microfinance is a way that we can give what we
have received in order to love others and proclaim the love that Christ has for us. And we
believe the most effective and biblically mandated way is through the local church.