RP220 Every Little Bit Counts

 RP220 Every Little Bit Counts?

One of the weapons in the fight against poverty is microcredit (also called microlending). Microcredit is the practice of giving very small, short-term loans to poor people. In general, the loans are 100 USD or less, usually paid back within six months. The loans help the borrowers start or upgrade small businesses. Microcredit organizations assume that poor people can lift themselves out of poverty if they only have access to standard financial services.

Grameen Bank, started as a project in 1976, is a pioneer of microcredit. It has given out more than eight billion dollars in loans to people who could never borrow money otherwise. Borrowers often have no steady job, no other assets, and no one to cosign on the loan—common requirements for getting a loan elsewhere. Grameen Bank promotes credit as a human right, and with a 98% repayment rate, it seems to have helped its borrowers improve their lives and made a profit through interest in the meantime.

Successes like Grameen Bank and others caused governments and NGOs to rush to fund microcredit operations. How wonderful to imagine that the cure for poverty could be profitable However, recent studies question how effective microcredit really is. Critics say that poor people with enough entrepreneurial drive to get a loan would have succeeded anyway. Those without the drive don't end up in better circumstances after paying back loans, which aren't always used for businesses. They also say that without a basic education, poor borrowers aren't equipped to manage the businesses they create. And though microcredit is described as a way to empower women, some say the loans aren't causing any measurable improvement in women's lives.

The ideas behind microcredit are uplifting: that all humans are filled with potential and that one small bit of assistance can help a whole family live better. They may, however, ignore systematic causes of large-scale poverty. Time and close study will tell if microcredit is really the miracle it appears to be.