INCOME: An estimated 1.5 billion people live on less than US$2 per day. Plan helps people escape poverty by offering microfinance loans used to invest in small businesses or farm improvements.

Here is an example of how Plan, through microfinance, assists communities escape poverty.

"Due to this scheme, I have achieved financial and social independence and I have more quality time to spend with my children and family."

A Bolivian mother who has joined Plan's microfinance program.

In Bolivia, Plan's microfinance programs form an important part of Plan.s work in helping families escape poverty, which in turn benefits children. The program has been so successful that Bolivians claim Bolivia as the home of village banking.

In these very poor communities, most women use their loans to make bulk purchases of foodstuffs direct from growers, which they then sell, in smaller portions, to families within the community. They also add value to goods by making cheese, cooking chickens, making fruit juices or wine in order to make their profit.

Some women also use the loans to open small roadside stores stocked with basic consumer items. The loan allows them to buy goods in bulk for a cheaper price.

Plan's microfinance scheme operates throughout Bolivia . in all Plan's program areas. In the Altiplano region alone, 150 village banks have been established among 500 communities. Groups of about 30 women are self-selected from those communities where women have some ability and skills to handle money and organise themselves.

Each woman starts out receiving a loan of around $120, which must be repaid over 16 weeks. Over time, the women may increase their loan to a maximum of $750. During the eight years that Plan has supported microfinance programs in Bolivia, the default rate on loans has been less than 1%.

Plan does not work directly with the village banks but selects a non-government partner organisation to administer the scheme on its behalf. The bulk of funding provided to these partners, who pass on the loans to the women, forms interest free capital that is paid back in full - generally between three and five years.

A modest rate of interest is charged which is designed to cover all the village bank's costs. The interest is critical to the sustainability of the program. Built into this interest rate is a component that enables Plan's partners to provide cost-effective and much needed health education, family planning and business skills to the women in the village loan groups. To qualify for a loan, the women must agree to attend these classes that are provided during regular village microfinance meetings.

Plan Bolivia's microfinance loan scheme is funded by donations and partly by child sponsorships.