Development efforts often focus on promoting macro-economic growth, as measured by the Gross National Product-assuming that the benefits of growth will trickle down to the poorer people in the society. But this growth largely bypasses the bottom of the population, who are condemned to continue to live in poverty.

Nevertheless, the poor have tremendous capacity to help themselves-if only they have the chance to do so. The availability of cheap credit is key to this: if people can generate sufficient surplus from their farms or small businesses, they can repay the credit and reinvest the remainder. Experience has shown that credit programmes targeted specifically for the poor-and especially for women-can have a marked effect on improving the incomes and living standards of rural people.

The HDI Micro-Finance project targets especially those who would not normally qualify for credit through the banking system: women, the landless, and other marginalized groups. Experience has shown that with the right types of support, these people are excellent credit risks; repayment rates often approach 100%.

The project provides small amounts of credit to people who would not otherwise qualify for credit through the banks because they lack collateral. Interested villagers (preference is given to women) form groups of 5-10 members. Each member invests the money in their chosen business and makes repayment by instalments according to the agreed-upon schedules (weekly, bi-weekly or monthly). Saving is also included as an important service of the micro-finance. The interest rate is modest compared to that of moneylenders, but usually set at a level that can cover inflation and administrative costs for financial and institutional sustainability. Default risk is minimised through "social collateral": if one person defaults, her fellow group members must repay the loan or be disqualified from receiving further loans. The amounts loaned are very small-often just a few dollars-but are enough to make a real difference to people struggling to make ends meet.