Tiny Loans, Tremendous Returns: Tales from the Microlending Frontier

Sometimes, small gestures can make huge differences in people's lives and livelihoods. That's the premise -- and the power -- of microlending.

For proof, one need look no further than the stories of Marcia and Karen, two entrepreneurs in Costa Rica. They've both been given a leg up from Grameen Trust and Whole Foods Market's (WFM) Whole Planet Foundation.

If you're a Whole Foods shopper, you may have heard the buzz about its Whole Planet Foundation. The grocer recently launched its 2012 Prosperity Campaign, in which it is raising funds to help women like Marcia and Karen expand their businesses and improve their well-being.

Baking up a better life for $200

In her Costa Rican community, Marcia is renowned as "the best baker in town." But when some of her baking equipment broke, her home-based business -- and the much-needed income it provided -- was in jeopardy.

That's where Grameen Trust, which provides microloans to low-income entrepreneurs around the globe, came in.

The first loan Marcia received from Grameen Trust in Costa Rica was for $200 -- a figure that many American businesspeople would view as "chump change." But that tiny loan made a world of difference, helping Marcia buy a new mixer and get her baked goods back in the oven and back on the market.

With the help of her daughter, Marcia sells cakes like the one pictured, as well as many other tasty baked treats. The business is thriving: Marcia's sales have quadrupled in the last three years. She supports her family on the earnings from her bakery; and her health issues mean that her ability to work from her home is a real lifesaver.

Overachieving in Undergarments

Karen is another microlending success story. When she saw other women in her community building enterprises with loans from Grameen Trust, she realized it might possible to start her own dream business, too.

Over three years' time, small loans have allowed Karen to build a business sewing men's and women's undergarments, which she sells locally. Her first $200 loan allowed her to buy cloth and raw materials to create her products. A second loan for $300 went toward buying a newer sewing machine that helps her make higher quality goods at a faster rate.

Karen has three children: Thanks to her home-based business, she can produce her merchandise while watching her kids.

Today, she's continuing to grow her skills and business, using higher quality materials for her wares and taking classes to further improve her handiwork.

What Will Women Do?

Most of Whole Planet Foundation-supported clients are women like Marcia and Karen. According to Grameen research, women business owners tend to use their profits to educate their children, improve their families' quality of living, and expand their businesses. Furthermore, they generally view paying back their borrowings as an empowering sign of financial progress.

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Assuming that loans to low-income borrowers -- even in small amounts -- would never be paid back, most lenders have stayed far away from such customers. Grameen has found that the opposite is true: Between 95% and 98% of the loans the bank extends are paid back, according to the Foundation. That's a better rate of repayment than either student loans or credit card debts achieve in the U.S.

Marcia and Karen's stories show how "small" gestures -- minuscule dollar amounts in traditional banking -- can make a huge impact on someone's hopes and dreams for a better, more secure future. Nobody has to be a millionaire to help change the world and foster better outcomes. They just have to be willing to lend that helping hand.

As part of its current Prosperity Campaign, running till the end of March, Whole Foods has pledged $850,000 in funding to Grameen America. It's also inviting its customers to help by offering fundraising opportunities at stores across the country, as well as the opportunity to simply donate small amounts for small loans.

Motley Fool analyst Alyce Lomax owns shares of Whole Foods Market. Motley Fool newsletter services have recommended buying shares of Whole Foods Market.