(This story supplements "FEATURE-Microcredit spreading to Africa from Asia" [ID:nL26303322])

By Joe Bavier

KINSHASA, May 2 (Reuters) - "It's not easy," says loan officer Eric Katembo. "If you're not used to it you can really get lost here. At this time of day, it's still okay. In a couple hours, you won't be able to move."

It is 8 a.m. and Katembo deftly navigates the narrow, muddy alleyways of Kinshasa's massive Gambela market on his way to meet a prospective client.

Katembo has been working in the Congolese capital's markets for the local unit of Frankfurt-based lender ProCredit for nearly a year, but after a few wrong turns even he is stumped.

"Sometimes you have to call them to come find you, there's no other way," he says, putting his mobile phone to his ear.

Today, Katembo is meeting Blanchie Mulema, 28, who has a market stall where she resells second-hand clothes she buys in huge tightly-packed bales.

"I heard about the bank from my neighbour," she said, as women gather around to sort through a new consignment. "I thought, with a loan, I could increase my stocks."

Katembo asks her questions, writing down the figures that will be used to assess whether Mulema will qualify for a loan. How much did a bale cost? How much profit could be made per bale? How many bales could she sell per week?

"You really get to see the improvement with your own eyes. You'll start with a taxi driver, who has one car. Then he'll buy two more," Katembo said.

TURNING POINT

Democratic Republic of Congo swore in President Joseph Kabila in December as its first democratically elected leader in more than 40 years, following elections meant to mark a turning point in the country's troubled history.

But the 35-year-old leader has inherited a nation in ruins.

Decades of mismanagement and a six-year war that killed an estimated 4 million people, mostly through conflict-related hunger and disease, have wrecked the economy and infrastructure.

As bad as things are, some experts now believe the key to building a stable future in Congo can be found in its past.

"There is a long history of microfinance in the east of the country," said United Nations economist Daniel Mukoko.

With few banking facilities historically available during three decades of rule by late dictator Mobutu Sese Seko, lender cooperatives evolved, offering small loans to average Congolese.

But as the country's economic crisis deepened in the early 1990s, culminating in 9,800-percent inflation in 1994, that system collapsed as collective accounts held in the now-defunct zaire currency were virtually wiped out.

When ProCredit made its first market analysis of Congo in 2003, there were only about 50 bank branches in a nation the size of Western Europe with more than 60 million people, and barely any were giving small loans, said ProCredit's Congo director, Oliver Meisenberg.

"All the banks were for the rich," Meisenberg said. "There was a huge need for credit."

ProCredit and Washington-based village banker FINCA International are in the vanguard of a movement that could spur development and financial reconstruction, and transform the country's anachronistic banking sector in the process.

LOANS FROM $40

"There wasn't any way to get a loan before. No way," said Rita Sansi, who with her husband assembles then rents out musical instruments to local musicians. "There was nothing."

The couple have just paid back their first $500 loan, having expanded the business and paid school fees for their four children. They now plan to take out another, larger loan.

"We think that microfinance is the segment with the best opportunity to respond to the needs of the population," said Mukoko, who works with the U.N. Development Programme.

Microsoft Chairman Bill Gates' charitable Gates Foundation pledged $9 million in grants and a $20 million subordinated loan in January to help ProCredit expand its Africa operations in Congo, Angola, Ghana, Mozambique, and Sierra Leone.

ProCredit offers loans as small as $150, and Meisenberg says more than half the loans it extends are for less than $1,000.

FINCA International, whose former board member Muhammad Yunus won the 2006 Nobel Peace Prize for his village banking system, goes even smaller scale, offering loans from $40.

"Having access to financial services is key to any development in this country," FINCA country director Mike Gama-Lobo said.

"The middle class population doesn't exist here. If there isn't microfinance to push people up, there will never be any development. The central bank has been very helpful. They get it. They see it as a huge development tool."

Relying almost entirely on word of mouth, ProCredit and FINCA have had overwhelming success in their short time here.

"By number of clients, we are the biggest bank in Congo. And we were that after just eight months," Meisenberg said. "But I'm not proud. It just shows the weakness of the banking sector."

FINCA International set up here in 2003 with $1.1 million in funding from U.S. government's USAID agency. It now has around 19,800 credit clients, a $3.5 million loan portfolio and an additional $1.4 million in savings accounts, Gama-Lobo said.

"The minute you see stability here, you're going to see the finance sector boom," he said.

"For now, I see ProCredit and us building the banking infrastructure in this country. And we could even use more competition. There's still lots of room in the market."

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