DEFEATED: Microcredit & Microgrants

[Glen-Rhodes]

Disclaimer: Please vote against the current version, which is currently at-vote. There contains two typos that, in my opinion, challenge the integrity of the entire resolutions. Instead of repealing and replacing, meaning two extra votes on the resolution, it would be much simpler to defeat it now and resubmit it after corrections are made. Thank you.

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Microcredit & Microgrants
Category: Free Trade | Strength: Mild

BELIEVING that through focused initiatives and international cooperation, poverty and suffering can be ended,

NOTICING that microfinance allows the impoverished access to much-needed financial assistance,

The World Assembly,

DEFINES microcredit as the extension of loans for small sums of money, by lenders to those in poverty, for the purpose of sustaining livelihood and encouraging entrepreneurship;

DEFINES microgrant as a gift of a small sum of money, for the purpose of sustaining livelihood and encouraging entrepreneurship;

DEFINES solidarity lending as practice of lending microcredit collectively to a group of persons, to decrease risk for lenders by increasing the probability of debt repayment;

DEFINES a defaulted loan as one that the borrower has failed to make scheduled debt payments for at least a year;

DEFINES borrow insolvency as the inability of a borrower to make scheduled debt payments, after all reasonable payment plans have been tried;

ENCOURAGES nations to strive to eliminate poverty through microcredit, social welfare, and other forms of assistance directed at the impoverished;

ESTABLISHES the World Microcredit Foundation (WMF) as a global resource for microcredit lenders and the world’s impoverished person, which is tasked with establishing WMF chapters in willing nations and ensuring the safety and efficiency of microcredit by:
- Determining credible, honest, and fair microcredit lenders and authorizing such lenders to participate in the WMF initiative, a global effort to provide microcredit and stimulate entrepreneurship;
- Forming lending standards to which all authorized WMF lenders are bound, and routinely inspecting the practices and finances of authorized WMF lenders;
- Disseminating information about WMF lenders, the WMF initiative, and microcredit in general, to microcredit lenders and borrowers;
- Working with borrowers to ensure the repayment of loans;
- Reimbursing lenders the balance of the principle investment in cases of defaulted loans and borrow insolvency;

ENCOURAGES WMF lenders to practice solidarity lending, believing it to be a building block of successful microcredit lending;

ENCOURAGES nations with areas of large numbers of impoverished citizens to inquire about and establish WMF chapters in those areas;

ENCOURAGES credit lenders to research and participate in the WMF initiative;

ESTABLISHES the Microgrant Institute as a subset of the WMF and charges it with:
- Determining individuals living in extreme poverty who are too risk-averse to seek out a loan or have been denied access to microcredit;
- Reviewing applications and determining if those individuals genuinely require assistance;
- Distributing a microgrant to those persons, for the purpose of sustaining livelihood and encouraging entrepreneurship.

Dr. Bradford William Castro

Ambassador-at-Large,
Permanent Chief of Mission for World Assembly affairs,
the Commonwealth of Glen-Rhodes

[A mean old man]

Not arging against, but does this not solely establish yet another of the many WA institutions and simply highly encourage nations to use it? I also assume that the small sums of money brought up in the final clause are to come from the "WA General Fund," though this cannot be stated in the resolution (one of the reasons why I hate the WA General Fund - it sets us all up for either a massive house of cards violation, or simply the inability to understand where the hell money to be spent due to WA resolutions is to come from).

[The Walden Estates]

Not arging against, but does this not solely establish yet another of the many WA institutions and simply highly encourage nations to use it? I also assume that the small sums of money brought up in the final clause are to come from the "WA General Fund," though this cannot be stated in the resolution (one of the reasons why I hate the WA General Fund - it sets us all up for either a massive house of cards violation, or simply the inability to understand where the hell money to be spent due to WA resolutions is to come from).

Do we know how much money is in the WA general fund?

[Glen-Rhodes]

Not arging against, but does this not solely establish yet another of the many WA institutions and simply highly encourage nations to use it?

Well, the World Assembly can't very well force people to take out loans.

I also assume that the small sums of money brought up in the final clause are to come from the "WA General Fund," though this cannot be stated in the resolution (one of the reasons why I hate the WA General Fund - it sets us all up for either a massive house of cards violation, or simply the inability to understand where the hell money to be spent due to WA resolutions is to come from).

Authors certainly can state that the mandates will be funded by the WA General Fund. It's simply a committee. There's just no need to. The WA General Fund is automatically tasked with funding "missions" of the World Assembly, the moment they are created. Should WAR#17 ever be repealed, the WA General Fund would still exist, but it would rely on voluntary donations, rather than 'assessed' donations.

And yes, I do intend for the monies paid out by the Microgrant Initiative to come from the General Fund, as well as loan reimbursements. Unless the IMI is to require fees for membership, it has no income itself to guarantee such things.


[float=left]Dr. Bradford William Castro

Ambassador-at-Large,
Permanent Chief of Mission for World Assembly affairs,
the Commonwealth of Glen-Rhodes[/float][float=right][/float]

[New Buckner]

Ambassador Dr. Castro,

At what level do we define what makes a country to be below the imaginary poverty line? You seem to have the steps in place to help fix them, but you don't say who they will be. You just say "impoverished". What makes a nation considered for that? GDP, unemployment levels, cost of living...if you leave it open to general interpretation, I fear it may be abused by nations who don't necessarily need the help to bring themselves up from the wasteland, but just shore them selfs up a bit.

I was wondering as well, but how will simple extending their credit, and in return receiving a payment in return, going to help them get out of poverty? The principal is still owed, and the same interest rate, and now you've added more money on top of the loan itself. All just to extend how long until the full payment is due. To me this just extends the inevitable.

If you really wanted to do something to bring them up from poverty, establish low/no interest long-term loans from this fund or no interest loans to those in a very extreme state of poverty. I feel that would provide more assistance than just extensions on existing loans, does this retro-activate to any existing loans from other nations to those considered "impoverished" or is this merely from the loans from the IMI?

[Unibot]

ESTABLISHES the International Microcredit Institute (IMI)

You must really want me to submit "WA Numeration and Units Act", because the International Measurements Institute will not find it very funny if the Micro-credit Institute steals their acronym from under their feet!

[Urgench]

We are tentatively in favour of this proposal, government support for micro-credit and Credit Unions can be a powerful tool for development. Might this statute create a WA Credit Union Federation also to allow these micro-credit organisations to coordinate their efforts internationally allowing them to develop international poverty alleviation and development strategies?

Yours,

[Charlotte Ryberg]

ESTABLISHES the International Microcredit Institute (IMI)

You must really want me to submit "WA Numeration and Units Act", because the International Measurements Institute will not find it very funny if the Micro-credit Institute steals their acronym from under their feet!

That is a good point. To avoid confusion I recommend calling it "World Microcredit Institute". That has not been assigned.

Other than that I see excellent potential.

[Quintessence of Dust]

Why can't this be done by the private sector?

-- Geoff
Paperclip Straightening & Token Liberal Intern
The Preludin Lounge (formerly known as the Office of WA Affairs)

[Grays Harbor]

While we believe that this could indeed be done much better in the private sector than in a government controlled situation, perhaps the proposal could be altered slightly as perhaps a clearing house for any such institution which offers such microloans/microgrants? Let potential ciustomers for these loans/grants know what is available and from whom, and as an advisory board to assist in filling out the neccessary paperwork? To try and match the client with the lender which is most advantageous?

and hopefully that makes some sense, that I permaybehaps got the idea I was trying to express across.

[Glen-Rhodes]

At what level do we define what makes a country to be below the imaginary poverty line? You seem to have the steps in place to help fix them, but you don't say who they will be. You just say "impoverished". What makes a nation considered for that? GDP, unemployment levels, cost of living...if you leave it open to general interpretation, I fear it may be abused by nations who don't necessarily need the help to bring themselves up from the wasteland, but just shore them selfs up a bit.

The rules for the extent of definitions in resolutions has never been fully explained to me, but I believe that the definitions of the various forms of poverty are provided by the Living Wage Act. That act doesn't state that the definitions apply only to it, so I'm assuming, as I did in the Food Welfare Act, that they apply to all mentions of poverty.

I was wondering as well, but how will simple extending their credit, and in return receiving a payment in return, going to help them get out of poverty? The principal is still owed, and the same interest rate, and now you've added more money on top of the loan itself. All just to extend how long until the full payment is due. To me this just extends the inevitable.

The point of microcredit isn't typically solely to keep oneself alive -- to pay for food, water, shelter, etc. The World Assembly has humanitarian aid programs for that purpose, and they don't involve loans. Instead, a major reason for microcredit is to spur entrepreneurship to the "unbankable", those that lack collateral, credit history, etc. The formation of a very small business, called a 'microenterprise' by some, should generate enough profit to pay back the loan, plus interest. These loans are not by any means large. A typical small business loan in a wealthy nation would be colossal compared to a microcredit loan.

If you really wanted to do something to bring them up from poverty, establish low/no interest long-term loans from this fund or no interest loans to those in a very extreme state of poverty.

That is what this proposal aims to do. Not specifically no-interest loans, as I doubt many creditors would participate in such thing, but low-interest, long-term loans are what's aimed for. The IMI has the authority to establish and enforce lending practices. It's implied that this includes setting interest rate caps, but I could make that more apparent.

I feel that would provide more assistance than just extensions on existing loans, does this retro-activate to any existing loans from other nations to those considered "impoverished" or is this merely from the loans from the IMI?

It could, but the retroactivity of the mandates here are completely up to the credit institution that supplied the loans and whether or not they choose allow borrows to refinance under IMI regulations. The IMI does not give out loans, it merely organizes private creditors, accredits them as safe and legitimate microcredit lenders, and regulates their lending practices.

Might this statute create a WA Credit Union Federation also to allow these micro-credit organisations to coordinate their efforts internationally allowing them to develop international poverty alleviation and development strategies?

I am not too sure what you mean, Ambassador Mongkha. Could you elaborate?

Why can't this be done by the private sector?

Well, I believe it to be a good idea for the World Assembly to establish an institution that provides impoverished persons with a reviewed and regulated list of microcredit lenders. It should prevent them from going to predatory lenders and loan sharks.

While we believe that this could indeed be done much better in the private sector than in a government controlled situation, perhaps the proposal could be altered slightly as perhaps a clearing house for any such institution which offers such microloans/microgrants? Let potential ciustomers for these loans/grants know what is available and from whom, and as an advisory board to assist in filling out the neccessary paperwork? To try and match the client with the lender which is most advantageous?

I do believe this is what the proposal already does. Is there a confused thinking that the World Assembly itself would be providing these loans, rather than private creditors? If so, you should know that that is not the case. If the ambassadors could point out which language leads them to believe so, I would certainly try and fix it.

[float=left]Dr. Bradford William Castro

Ambassador-at-Large,
Permanent Chief of Mission for World Assembly affairs,
the Commonwealth of Glen-Rhodes[/float][float=right][/float]

[Grays Harbor]

While we believe that this could indeed be done much better in the private sector than in a government controlled situation, perhaps the proposal could be altered slightly as perhaps a clearing house for any such institution which offers such microloans/microgrants? Let potential ciustomers for these loans/grants know what is available and from whom, and as an advisory board to assist in filling out the neccessary paperwork? To try and match the client with the lender which is most advantageous?

I do believe this is what the proposal already does. Is there a confused thinking that the World Assembly itself would be providing these loans, rather than private creditors? If so, you should know that that is not the case. If the ambassadors could point out which language leads them to believe so, I would certainly try and fix it.

[float=left]Dr. Bradford William Castro

Ambassador-at-Large,
Permanent Chief of Mission for World Assembly affairs,
the Commonwealth of Glen-Rhodes[/float][float=right][/float]

Then perhaps we misread our copy of this. If that is the case, then that issue has been cleared up for us.

[New Buckner]

The rules for the extent of definitions in resolutions has never been fully explained to me, but I believe that the definitions of the various forms of poverty are provided by the Living Wage Act. That act doesn't state that the definitions apply only to it, so I'm assuming, as I did in the Food Welfare Act, that they apply to all mentions of poverty.

Very well, I just wanted to ensure somewhere it was specifically listed who this resolution would apply to.

The IMI has the authority to establish and enforce lending practices. It's implied that this includes setting interest rate caps, but I could make that more apparent.

The IMI does not give out loans, it merely organizes private creditors, accredits them as safe and legitimate microcredit lenders, and regulates their lending practices.

So what you are basically saying is that this organization will step in and dictate to private company's what they will do with their capital? Correct me if I'm reading this wrong.

Are banks who wish to provide loans to "poverty" stricken nations going to first have to go through the IMC or does it take all banking institutions to belong to this group without choice?

[Grays Harbor]

It is our understanding that any interest caps put into effect would be reasonable and proper, not an arbitrary maximum, and would depend on the region or nation the loan is being proffered to. It is also our understanding that no banks would be mandated to go through this organization in order to give out loans. However, it would be in their interest to do so, as they would then be made available for loans they may well be unaware through the organizations efforts in gettings loans to those who need them. In our opinion the agency should also set a minimum interest rate so that banks can get a return on their money without either cut-throating each other or for local governments demanding unreasonable rates.

IMI agent telling customer A that microloans are available from Banks B, C, D, E and F. Banks G and H are also making loans available, but have not gone through the agency, so the potential customers may not be aware of them. The agency sets a maximum of X% interest on the loan so that banks may not take advantage of the situation and essentially "loan shark" to those who may have no choice but to take out the loan. The loan could then be taken out by customer A based on who offers them the best deal.

That is how I see it operating anyhow.

[New Buckner]

Ambassador,

Just to confirm then, the participation is not being forced upon every bank in every nation. IF they do provide loans to poverty stricken nations however, they WILL have to abide by the regulations in this resolution but the terms of this resolution only apply to THOSE loans, not one to say a high end economic superpower.

Respectfully.

[Glen-Rhodes]

Just to confirm then, the participation is not being forced upon every bank in every nation. IF they do provide loans to poverty stricken nations however, they WILL have to abide by the regulations in this resolution but the terms of this resolution only apply to THOSE loans, not one to say a high end economic superpower.

Yes, that is all correct. However, we should make a minor correction. Loans are provided to the people of nations, not to nations themselves. I'm sure that's what you meant, though. The scenario provided by the Ambassador from Greys Harbor is also correct.

[float=left]Dr. Bradford William Castro

Ambassador-at-Large,
Permanent Chief of Mission for World Assembly affairs,
the Commonwealth of Glen-Rhodes[/float][float=right][/float]

[Glen-Rhodes]

(bump)

[Freeoplis]

We agree with the concept to support new businesses and entrepreneurship, however giving loans to those already in poverty and making them indebted to lenders is morally questionable. Is this proposal only dealing with business start up or to the wider scope of those in poverty.

[Sanctaria]

The Sanctarian Government supports this resolution in principal, but mirrors the concerns expressed by the esteemed, honourable Ambassador from Freeoplis.

We would also like to see a more in-dept analaysis of exactly how the recipients of the loan repay said loan and also what happens in the scenario that their attempt at entrepreneurship fails?

If we have accidently glanced over a post explaining this, perhaps the esteemed Ambassador would be so kind as to explain again.


Yasminé Pontif
Minister for the World Assembly at the Department of Foreign Affairs
The Divine Republic of Sanctaria

[Glen-Rhodes]

We agree with the concept to support new businesses and entrepreneurship, however giving loans to those already in poverty and making them indebted to lenders is morally questionable. Is this proposal only dealing with business start up or to the wider scope of those in poverty.

The microcredit and microgrant initiatives in this proposal are for the purpose of sustaining livelihood and encouraging entrepreneurship. Only those in poverty that can realistically pay the loan back (as determined by IMI standards) are extended credit. Those who are too risk averse or do not qualify for microcredit are able to take park in the Microgrant Initiative. The IMI will work with borrowers to find a feasible plan for repayment, including installments, low lump sum, refinancing, etc. If repayment is impossible, the IMI pays the balance of the loan's principle to the lender. I believe that also answers Ms. Pontif's question, as well.

Should the language not reflect this, please raise a point.


Dr. Bradford William Castro

Ambassador-at-Large,
Permanent Chief of Mission for World Assembly affairs,
the Commonwealth of Glen-Rhodes

[Freeoplis]

We thank the Ambassador for clarifying the proposal and wish to raise further observations:

DEFINES microcredit as the extension of loans for small sums of money, by lenders to those in poverty, for the purpose of sustaining livelihood and encouraging entrepreneurship;

What would be the threshold to define if an individual is in poverty?

DEFINES solidarity lending as practice of lending microcredit collectively to a group of persons, following two basic principles: the groups are typically of mixed-gender and consist of five persons;

Is this clause really needed. We could accept the 5 person criteria but the "mixed gender" requirement would discriminate.

ESTABLISHES the Microgrant Initiative as a subset of the IMI and charges it with:
- Determining individuals living in extreme poverty who are too risk-averse to seek out a loan or have been denied access to microcredit;

Again what would be the definition of "extreme poverty"?

[Glen-Rhodes]

What would be the threshold to define if an individual is in poverty? ... Again what would be the definition of "extreme poverty"?

WAR#21, "Living Wage Act", has defined poverty in terms of the World Assembly resolutions. I believe it is unnecessary to further define it here. Should "Living Wage Act" be repealed after this proposal becomes a resolution, it's safe to assume that the IMI would continue to define poverty as it always had.

Is this clause really needed. We could accept the 5 person criteria but the "mixed gender" requirement would discriminate.

I'm not sure how it would be considered discriminatory. The mixed-gender principle of solidarity lending exists as result of studies that show that social pressure is typically greater on women than on men. With a mixed-gender group, the women are more likely pay back their share of the loans, so a mixed-gender borrowing group has a better chance of staying afloat than an all-male group.

Dr. Bradford William Castro

Ambassador-at-Large,
Permanent Chief of Mission for World Assembly affairs,
the Commonwealth of Glen-Rhodes

[Bears Armed]

Is this clause really needed. We could accept the 5 person criteria but the "mixed gender" requirement would discriminate.

I'm not sure how it would be considered discriminatory. The mixed-gender principle of solidarity lending exists as result of studies that show that social pressure is typically greater on women than on men. With a mixed-gender group, the women are more likely pay back their share of the loans, so a mixed-gender borrowing group has a better chance of staying afloat than an all-male group.

"So, if that is the case, why not allow borrowing by all-female groups too?

[Grays Harbor]

We agree with the concept to support new businesses and entrepreneurship, however giving loans to those already in poverty and making them indebted to lenders is morally questionable. Is this proposal only dealing with business start up or to the wider scope of those in poverty.

The loans are designed to help them start businesses, which then make money, which allow them to repay the loans, and they are no longer in poverty. Quite simple, really. If the funds are misused, and the person getting the loan remains in poverty, then that is essentially their own fault. Microloans and microgrants are small loans and grants designed to give budding entrepeneurs, small scale businessmen and women, a start. How is that morally questionable? That sounds like PC BS to me. If you want to help somebody out of poverty, you need to give them the means to help themself, not just toss money at them no strings attached. That helps nobody.

[Freeoplis]

We agree with the concept to support new businesses and entrepreneurship, however giving loans to those already in poverty and making them indebted to lenders is morally questionable. Is this proposal only dealing with business start up or to the wider scope of those in poverty.

The loans are designed to help them start businesses, which then make money, which allow them to repay the loans, and they are no longer in poverty. Quite simple, really. If the funds are misused, and the person getting the loan remains in poverty, then that is essentially their own fault. Microloans and microgrants are small loans and grants designed to give budding entrepeneurs, small scale businessmen and women, a start. How is that morally questionable? That sounds like PC BS to me. If you want to help somebody out of poverty, you need to give them the means to help themself, not just toss money at them no strings attached. That helps nobody.

We raised this issue not understanding whether the loans were just for business start ups or also for the wider scope of people in poverty. Having the issue clarified as the former our concerns have been elevated and welcome the microgrant aspect of the proposal in dealing with individuals experiencing poverty in general. We thank our esteemed colleagues from Grays Harbor for their further explanation.