Micro-Credit?

Micro-Credit Group in Africa

I enjoyed the pros and cons presented about micro-finance and its effect in poor communities. I think the chapter does a great job going through a brief history of micro-finance and presenting the reader with statistical evidence supporting and negating the impacts of it. In this chapter Micro-finance is almost presented as a gateway from the chains of poverty. Statistical evidence proved otherwise. The authors use statistics at the beginning to show just how costly it is to obtain a loan from a moneylender and to exemplify that, family aside, the poor have little places to turn for cheap money. I understand that lending to the poor is difficult because of the potential of default rates, but, micro-finance seems to be just an undermining of over-priced, predatory, community moneylenders and shady figures. The evidence produced in this chapter gives light that, yes, micro-finance is working in poor communities but the chapter also gives statistical evidence that it is not working at the level that was intended. On page 171 the authors state, “families that started a new business over a fifteen-month period went up from about 5 percent to just over 7 percent – not nothing, but hardly a revolution.” In my mind, other than the reasons the authors state, there could be a few reasons for this. Most micro-finance institutions believe in primarily lending to women. This is wonderful, I completely support giving women the opportunity to become entrepreneurs and build a business to support their families. However, there have been many studies completed showing that men typically are “riskier” and are willing to and have started more companies. I understand that for the better part of history women have been marginalized, so this isn’t completely a far comparison but I think it is important to note. Would allowing men more access to this micro-credit, show the growth promised by these institutions. Subsequently, will the institutions be will to do this because with more risk there is a greater reward but also the potential for a greater loss. Does the “play it safe? mentality that micro-credit promotes give individuals and families for that matter the ability to even build out the next Google( That may be a stretch)? I do not believe so. In my mind micro-credit does a wonderful job at giving the extreme poor credit to enable themselves to better educate and advance themselves. This approach can slowly change poverty as we know it. Will the next major company be financed by a micro-credit institution, most likely not, but micro-credit gives the ability to families worldwide to explore a better life for their children.

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One Response to Micro-Credit?

  1. ekfletch says:

    Wes, nice analysis and I like the picture. Nice job this semester. Have a wonderful break.

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