The cover story in this week’s New Yorker (via National Dialogue on Entrepreneurship) is about the debate over the future direction that micro-financing should take. The evidence is overwhelming that micro-financing is a powerful tool to help people use free enterprise to pull themselves out of poverty. The debate is over what business model is best suited for the entities that provide micro-financing.
On one side of the debate is Nobel Peace Prize recipient Muhammad Yunus, who favors the non-profit model used in his Grameen Bank. This model argues that the goal is eradicating poverty and that a non-profit keeps the focus front and center on this objective.
The other side of the debate, favored by many cashed-out entrepreneurs such as eBay’s Pierre Omidyar argue that we should not be concerned with the form these agencies take. Whatever form works best in a given situation is what should be used.
I agree with the second approach. Let the each situation, dictated by local markets, populations, and economies, dictate whether a non-profit or for-profit is the best model.
Dr Jeff Cornwall
Co-founder of The Entrepreneurial Mind, serial entrepreneur and professor of entrepreneurship.
Completely different side of the coin. Very Macro. If you get a chance, read “confessions of an economic hitman” economichitman.com.
Short of it is that the “iron triangle” of government, military and business (read engineering/contractors) is spreading our nations influence by sending in consultants to underdeveloped countries that have resources or could fall into enemy control. These ‘economic hitmen’ formulate overly rosy long term projections of what increased infrastructure invesment would do to the nations GDP.
We then convince international banks/monetary fund to lend them billions to upgrade comm/transport/other systems and take the money right back by having our engineering firms do the work.
So mr 3rd world sees an uptic in gdp due to an improved infrastructure, but what little is left after paying the interest expense is pocketed by the family in power (who we often put in place) and not the nation as a whole.
We now have them in our pockets. Much simpler to sell in the media of “improving standards of living” by investing in them than it is to invade/attack through traditional means.
This works so well and we’ve seemed to have forgoten how effective it can be…but the contracts are still there for the Haliburton’s and Bechtel’s of the world, so who really cares, right?
I’ll be attending a microloan seminar today at lunch time. Thanks to Kiva.org, I even get to participate in the microlending process.
Though the Nobel prize to Grameen Bank gives microcredit high profile,and big commercial banks want to get in on the lending now that it’s become popular and there are a billion potential customers, we have to realize that there is a significant faith based component to micro lending historically.
This dates back to the Torah and is embodied today in the International Association of Hebrew Free Loans (see http://www.hflasf.org/ and freeloan.org). It is also popular as a tool for Christian economic development in conjunction with other relief and ministry.
My fear is that, like hospitals, which were also started by charitable and usually faith based institutions, microlending will become the province of big business interests and become “microusury”, the equivalent of the pay day loan.
So I agree, let’s not let the Johnny come lately’s who sniff the quick profits of usury come to the party and act 1) as if they give a hoot about the people being helped and 2) then regulate it to their liking so they can eviscerate it as a tool for economic liberation!