The Grameen Bank micro-credit model: Lessons for Australian Indigenous economic policy

Abstract

Policy-makers have become increasingly interested in the use of micro-credit models to alleviate poverty among Australian indigenous communities. These models, such as the model developed by the Grameen Bank, work to extend small amounts of credit to entrepreneurs too poor to qualify for commercial lending. The key element of the Grameen Bank model is its peer group lending structure, which fosters mutual accountability for loans among borrowers. <p>Neither the Aboriginal and Torres Strait Islander Commission (ATSIC) nor commercial lending institutions have utilised micro-credit lending strategies. While internal analysis conducted by ATSIC shows that smaller loans (of less than $30,000) are more likely to be repaid, ATSIC loans to indigenous businesses continue to be relatively large. Restriction of lending to large loans has, however, effectively excluded large numbers of potential borrowers from access to credit. Credit access problems are further compounded for indigenous women, who often have limited credit records and no collateral. <p>Case studies of replications of micro-credit programs with indigenous communities in America and Canada show that it is possible to adapt these programs to developed countries. However, policy-makers may encounter a series of problems when trying to adapt a similar model to Australia. In particular the presence of low population density, welfare payments, investment opportunities and specific indigenous cultural practices are problems that need to be addressed if such a model is to be viable.