doc_text: John Hatch, founder of the non-profit Foundation for International Community Assistance, promotes village banking to encourage private enterprise in the Third World.
  What he foresees is a body blow to world poverty through bootstrap economics.
  By ARTHUR H. ROTSTEIN, Associated Press Writer : TUCSON, Ariz. (AP) :
  John Hatch says he hit upon his Third World "poverty vaccination" while panic-stricken on a flight to Bolivia.
  He had decided he could not comply with requirements of a consulting job he had accepted from the Agency for International Development, and he was scrambling to come up with a suitable substitute.
  "And on my second double bourbon at 35,000 feet up flying over the Andes, I have to say it was like this thought just rolled through my body," Hatch recalls.
  "I had my calculator out and I was sketching this thing
  and I was doing numbers, and I arrived in La Paz with a full-blown concept."
  What he had stumbled upon was village banking, a system of investment using small revolving loans to poor women to finance their private enterprise, allowing them to create savings while paying interest and qualifying for bigger loans.
  The series of loans, starting at $50, is renewable over three years to a ceiling of $300, allowing recipients to reach a level at which they can qualify for commercial credit.
  What Hatch envisioned on that plane five years ago has translated into 400 village banks in nine countries with more than 35,000 members.
  Portfolios total $1.6 million, with a 96 percent repayment rate.
  Village banks are operating in Mexico, Haiti, Thailand, Guatemala, Honduras, Costa Rica, Bolivia, Peru and El Salvador.
  The concept is similar to the one behind the Grameen Bank of Bangladesh: channeling money to the impoverished, principally mothers, without the demands of commercial banks for collateral, so they can improve their families' lives.
  What Hatch foresees is a body blow to world poverty through bootstrap economics.
  Hatch, a one-time Peace Corps volunteer with a doctorate in economic development, is founder and president of the non-profit Foundation for International Community Assistance, which recently moved its headquarters from Tucson to Alexandria, Va.
  He says its impetus was, and remains, the thousands of children worldwide who die daily because of starvation, what he calls the sacrifice of "probably our most precious resource."
  Hatch focuses on reaching mothers in the belief that strengthening them economically lets them care for their children better.
  There is "almost a 100 percent guarantee" that increased income for women will go into improvements in their children's welfare, Hatch says.
  "We teach severely poor mothers how to create their own self-managed bank, which provides them with self-employment loans, provides them with savings incentives and provides them with a support group of mothers like themselves, so that they are all attacking change at the same time."
  Lawrence Yanovitch, small enterprise development program coordinator for Catholic Relief Services in Baltimore, Md., says, "John Hatch is close to the voice of the poor.
  Though he's come up with some sophisticated economic tools, he's kept the humanitarianism."
  Catholic Relief Services entered a five-year, $1 million joint venture a year ago with the U.S. Agency for International Development and the foundation to create 40 village banks in Thailand.
  They targeted microenterprise development through small entrepreneurs, vendors, village market women, who in some developing countries comprise up to 50 percent of the employment.
  Capitalization for one bank typically will cost a sponsoring agency $5,000.
  Beryl Rupp, a Rotary Club official in Phoenix, says the bank members buy necessities with their profits or savings: a chair to sit on, pots to cook in, blankets, better food.
  The women, when asked, speak of the greatest benefit in terms of what Hatch calls "empowerment perceptions."
  "They say things like, `Now I'm somebody,' or `My husband respects me more."'
  Their vehicle for improvement is the village bank, each comprised of 30 to 50 women who, through loans starting at $50, can earn enough to provide savings and create capital.
  Hatch says the loans give them freedom to start their own investment projects in or near home.
  The foundation will go into a village with a joint-venture partner that puts up at least half of the capitalization, such as Rotary Clubs or Catholic Relief Services, and identify a key woman.
  She then contacts others to attend an organizing meeting.
  "Forget the mayor, forget the priest, forget the chief," Hatch says.
  "We want to know who the most powerful woman is in that village."
  At the meeting, the women circle illustrated examples of quick-turnover work they want the loans to finance.
  It might be selling produce, groceries, baked goods, raising chickens, sewing or craftwork.
  Each woman signs her name or provides a thumbprint as collateral, agreeing to repay one-sixteenth of the loan weekly, plus interest of 1 percent to 3 percent, in line with local banks.
  In some countries, the repayment rate has been 100 percent.
  Overall, the average is 97 percent, says Hatch.
  "Fifty percent or more are illiterate, and I would say 90 percent of them don't have any idea of what they're getting into when we start out," says Hatch.
  "And yet within 16 weeks they're all experts.
  They just learn as they go."
  Women who join the bank screen members and elect their leaders from first-meeting attendees.
  At the end of the 16th week, each member's loan balance is zero.
  But at the same time, each woman has been depositing weekly savings of at least 20 percent of the original loan.
  The savings serve as incentive for subsequent loans by increasing the credit line each time, Hatch said.
  Interest in village banking is mounting.
  The United Nations has provided a $50,000 grant to research the effects of women's empowerment through village banking on maternal and child health practices.
  The foundation has major proposals pending with the Agency for International Development, the Ford Foundation, Citibank and the Chase Manhattan Bank, among others.
  Rotary Club 100, a Phoenix organization, and a Rotary Club of Mexico City are in a joint venture, having funded five village banks in Guaymas, Mexico, with another four to be launched in the slums of Mexico City.
  Hatch says he believes village banking has a role to play in reducing poverty along the Mexican border and in slowing down migration to this country.
  As for whether such a system could work in the United States, Rotary's Rupp says, "Frankly, it's the only hope we have of changing the welfare system."
  "Ultimately the way out of poverty is savings," Hatch adds.
  "It's got to be built on the back of their own savings."
summary_text: John Hatch happened upon a novel idea.
  His idea was something called "village banking."
  This system is a means of investment using small loans to poor women to finance their own private enterprise, e.g., selling produce, crafts, etc.
  This arrangement allows them to create savings while paying interest and thereby qualifying for larger loans.
  The "village banking" system has grown to nine countries.
  Hatch says he created the system in order to channel money to the poor, primarily the mothers of children who would otherwise starve to death.
  The women have a loan repayment rate of nearly 100 percent.