While $100 is nowhere near enough to launch a business here, Oak Brook-based Opportunity International is proving that just a small amount of money can help citizens in some of the world’s poorest countries become entrepreneurs.

“We provide the finances for small businesses that can in turn create economic transformation,” said Dennis Ripley, senior vice president for programs at Opportunity International. “This can eventually promote an overall social transformation.”

A makeshift barber shop consisting of a chair under a group of trees or a mechanic with a back alley for a garage and a $300 set of tools may not seem like large business ventures by U.S. standards, but small steps such as those are all that’s needed to make a big difference in some poor nations.

The process has been dubbed “microfinance” and was developed as a responsible way to get money into the hands of aspiring entrepreneurs who could then help fund a small start-up business.

“It used to be that the U.S. or British government would just give huge grants to these countries, but that money would rarely find its way down to the poorest people,” said Ripley. “There were often sticky fingers at higher levels. This way (microfinance) is much more responsible and money gets into the hands of highly entrepreneurial people.”

The idea of modern microfinance dates back to the 1970s, and the company that would eventually become Opportunity International began around that time as well.

Al Whittaker, the former head of Bristol Myers International Corporation, teamed up with David Bussau, an Australian entrepreneur with the same idea, and began offering start-up money to some of the world’s poorest.

However, it was in the 1990s when the idea reached another level of innovation as Opportunity International established savings and loan banks in numerous third-world countries.

Now, the non-profit organization owns 17 savings and loan banks on five different continents that eventually will evolve into self-sufficient operations.

“In many of the countries we work in people never had this option,” said Ripley. “When we open one of these banks people come from miles around, by the thousands, to open up small savings accounts. People in nations like Malawi (in southeastern Africa) are actually really good savers, but before it was just stuffed in pillow cases. It was dead capital.”

Malawi is the second poorest country in the world, with a very small percentage of wealthy elite and the overwhelming majority living in poverty, said Ripley.

While there are a few banks there, they are reserved for the wealthy elite and turn away the majority.

With a savings and loan bank from Opportunity International, anyone with capital is eligible for an account and can earn interest on his investment, said Ripley.

The non-profit raises money from private donations in counties like the U.S. and other wealthy nations and then uses that money to finance the construction of the banks and their initial staffing costs. With an influx of money from local residents, the banks then become self-sufficient.

The staffs initially consist of a mix of local workers and often-retired industry experts. Eventually the banks become wholly staffed by locals.

The money accumulated from locals then helps cover loans that are used to finance local business ventures. The loans are usually in the $50-$500 range and always have interest tacked on. This keeps everyone honest.

“We found that loans without interest are not taken very seriously,” said Ripley. “But people take a 10 percent loan very seriously. We are fortunate to have a 98 percent return rate on our loans.”

Currently, the non-profit has 1 million loans issued worldwide. Most of the countries that Opportunity International operates in do not have a system of personal identification such as the U.S. The non-profit group had to develop its own key-card system of electronic identification to keep track of its loans.

The reason that Opportunity International has such a high return on loans is because it developed a “trust group” system that helped insure both the lender and the recipient.

Trust groups consist of a group of people who apply collectively for a loan and are responsible for making payments on a set schedule. If a member of the group cannot make a payment then the rest of the group can cover him. However, this makes entrepreneurs very cautious about whom they pair up with.

“It is a cross guarantee,” said Ripley. “They want to pair up with like-minded individuals that they can trust to work hard and make the payments.”

The groups don’t usually go beyond 35 people and the majority of them are women. Opportunity International has found that women and children usually fall in the lowest economic class because the father has either fled responsibility or died, said Ripley.

“We actually prefer giving loans to women as well because studies show that they are more likely to use that money to improve the lives of their children,” said Ripley.

Oddly enough, trust groups don’t work in communist countries like China or the former Soviet-bloc countries. There, the group does do individual loans.

“In those countries you were taught to tell on your neighbor, so trust is often hard to come by,” said Ripley.

Experience has shown that it is much safer to lend money in large urban areas, where resources are greater and the workforce is larger.

However, some of the most economically depressed areas are rural, where the main source of income is agriculture. It is not easy to give out loans that are basically at the mercy of weather patterns, but the non-profit has developed a unique plan that provides insurance for the loans that it approves to farming ventures.

“At first we wouldn’t lend out to farmers in many countries because we had to protect our capital,” said Ripley. “But we then created the first indexed-based weather insurance. Some countries have tracked weather patterns and we can project rainfall.”

The next step was to compile the information and take it to insurance companies that could then insure the bank against a possible loss. The non-profit then pools together three to four insurance companies to spread the risk. The program is in its second year of operation and has been a success.

While microfinance has its detractors and critics who think the process either acts as welfare or takes responsibility away from the ruling government where it should be, Opportunity International has seen success and has only expanded its mission in the past decades.

Big-name philanthropists have responded to the group’s call, with Bill Gates recently pledging $15.4 million.

Still, the work is far from over as Ripley points out that 90 percent of the population in areas that the non-profit in works in are still poverty-stricken and need help.

According to the World Bank, microfinance could benefit 500 million families worldwide, but only 50 million currently have access.

With a little extra money they could start or improve a business venture that could then create more jobs and capital in an area that desperately needs it, said Ripley.

“People don’t starve because there isn’t enough food,” said Ripley. “People starve because they don’t have any access to capital. They have no resources to support themselves.”