Microfinance

I have recently become interested in “Microfinance” and “microloans.”
The US SBA has a notion of microloan- a loan from $500 to US$35,000. That still seems like a lot to me. No, what I’m interested in is even tinier than that, and thus more accessible- smaller amounts means more loans for more people for the same investment capital.

The idea being that instead of just shelling out whenever you see some bloated
starving Somalian kid, you instead loan people in developing countries a very small amount of money, for example US$30, to invest in their “business,” which for example could be something like buying a couple of goats to breed for milk and meat. The debtors then pay back this tiny loan in tiny increments- a couple of cents a month.

From What developing nations are teaching American women about business (by Marlene C. Piturro):
India’s Ela Bhatt started the Self-Employed Women’s Association, a trade union and its bank in 1974, to help its 4,000 members earn a living. The association lends amounts as little as 50 rupees ($1.40) to buy seed corn or fabric to women who couldn’t even sign their names. Bhatt’s bank has maintained a loan portfolio of $3.6 million and reached 85,000 customers. The group has a loan repayment rate exceeding 95 percent.

More on microlending:

• Bang for the Buck by Tara Godvin
• Grameen Bank article
• WWB “get involved” page

Something else: recently the trend is in the commercialization of microfinance- using the well-established market forces to make microfinance itself more self-sustainable, and balancing this against the historical capitalistic tendency to exploit the poor. Search for “Comercialization of Mircofinance.”

I have recently become interested in “Microfinance” and “microloans.”