March 6, 2010

Are You Mad: Micro-Finance for poverty reduction

You may want to check our next post in the series about Making a Difference: Micro Credit at G-lish. Here is a short excerpt:

"There has been a lot of buzz about micro-finance in the past few years, not without reason. That statistic about living on a dollar or two dollars a day in developing countries is very real and it sucks in reality. Translate that into, roughly, the same value in USA terms (I’m no economist—this is a rough estimate): You and your dependents are living on less than $50 a day. You can eat, just. You can “not die”, provided you stay healthy, but you can hardly get ahead, you can hardly pay rent, and you can barely afford school fees or medical bills.

Now, add to this the reality that you have no social welfare system. Many developing countries struggle to provide basic needs such as access to water and a regular electricity supply, much less a welfare system. Now, imagine you need to borrow $300 to pay a medical bill. This is five times your daily income from which you have nothing left over at the best of times. Where would you go for money? The bank? If you’re living on one or two dollars a day in the developing world the bank will not lend you money. Opening a bank account full-stop is a challenge. A bank loan is out of the question. So, family. Your family is equally poor. Possibly poorer. Your family can’t help."

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