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Beyond Microcredit
Alex Steffen, 30 Nov 03

Microcredit is a simple idea, really: you lend people who have nothing a tiny bit of money so that they can begin to make some money, part of which they pay back to you so you can do the same thing for the next person. It has, generally speaking, been a smashing success, and will by 2005 have given as many as 100 million people a chance to escape the most dire poverty. But it's not enough.

The NYT recently called for a "microfinance" revolution. They're right. Microcredit is a powerful tool, doing vast amounts of good, and could (should) be extended to every eligible person in the developing world (though of course, it isn't a silver bullet).

But small loans are not the only business and financial needs of the poor. They also need financial institutions which will help them save money at interest, transfer funds at low charges (remittances from immigrant workers in the developed world to their relatives in the developing world, for instance, account for more money than all foreign aid programs put together), and receive short-term or emergency credit at non-usurious rates. Similarly, the poor need the skills, education and political organization to make use of these opportunities and not be victimized in the process.

Seems like a perfect example of a problem that calls for a transcommercial solution, something like the old-fashioned credit unions, run for the benefit of their members, except doing business internationally. No small job, but a needed one.

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Comments

Something we need Real Soon:

A registry, or rating service, for microloan charities.

I've been sending money to an outfit called FICA, but I don't know how they compare to others that run small business loan banks.

I can see a potential for serious abuse, and would like to be sure my money is doing the most good it can.


Posted by: Stefan Jones on 1 Dec 03

Hey Stefan! That's a great idea. A rating system for the trustworthiness of microcredit lenders would be extremely useful. Wonder if anyone's working on that sort of thing?


Posted by: Alex Steffen on 3 Dec 03

I have recently begun a personal experiment in microloans. It is micro-micro, for sure. Finally having a bit of surplus, I am dedicating $1000 to loans for people who I experience as essential to my community for contribution. They are generous, courageous, creative and/or politically committed. Maybe they need money for medical bills, rent, or writing a book. There is no hierarchy of need. The loans are for less than $500.00. As soon as the money comes back, out it will go again. When I have more, I will be able to do more. I think that a number of individuals doing this quietly can impact a community in a big way. There is something deliciously supportive about abundance arriving in an unexpected way, both for the giver and the receiver. People feel deeply cared for in a way that they don't when institutions or bureaucracies are doling out benefits.

The first payment went out in November and is scheduled to return in March or April as a tax refund. I had to practically beg the receiver, a struggling single Mom, to accept the loan. She insisted on a formal agreement. I had to let go of my attachment to 'my money' It felt good to not worry if she took her friends out for pizza or drove to Spokane. We each talked about our fears around her kitchen table.

When others see how this works, I believe they will want to start their own microloan experiment. What makes it work is this. First, the giver is related to the receiver through bonds of friendship, work, neighborhood, or maybe friend of a friend. Second, the giver's sense of the receiver's predicament is intimate and authentic. There are no applications to fill out. It starts as a conversation. It just feels right. The offer is made. This is not charity. More like communal wealth.

I could see this developing in different ways. Rumor has it that some others would like to donate to my Neighborhood Fund. That may work well or not. I'm willing to give it a try. I would be interested to hear of similar experiments.


Posted by: Julie Wenner on 8 Dec 03

Just want to receive new about microfinance.


Posted by: Fran├žois MIAMBANZILA on 8 Jan 04



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