Microcredit

[Icarus]

On one level, why are we even having this discussion?

Do we find fault in business loans at a larger level? No?

This is the same thing, just move the decimal point. The only innovation is applying the concept at such a “small” level.

Every other part of the model is identical. The end.

[Triskadecamus]

Well, one big reason we are having it is that the Nobel Comittee evidently discussed it, and if those guys found that a worthwhile endeavor, we might as well.

Tris

[threemae]

Yeah, but the Nobel committee will never give out props for World of Warcraft, and god knows this board likes to discuss that, so I guess the question really is what the messed up priorities of the Nobel committee is.

[even_sven]

I’m living in an area where microcredit is a very real and important thing.

There are a few things you have to realize. First off- there are no “real jobs”. My rather large town has one factory, one bank, and a couple of restraunts that have employees. There are a few government workers (teachers, etc.) but all of these are centrally appointed and come from different provinces.

Literally EVERYBODY else is self employed- from the moto drivers to the callbox ladies to the women selling vegetables on their front porches. Thats what “unindustrialized” means. No factories. No stores. No Taco Bell. Everybody makes what they can make and sells it where they can. And so EVERYBODY is an entrepeneur. Those that arn’t don’t get money. Often this means women and other people that don’t have control of inhertences are the ones with no money, which means they have trouble doing things like sending their female children to school and escaping abusive relationships.

There is almost zero access to banking. There are about seven ATMs in this country. In order to get a bank account, you need around a hundred dollars. The average income is $600, and most of that is tied up in the seasonality of farming. The reason they have “microcredit” is because they don’t have real credit. Other than that, they rely on “tontines” (investment clubs- kind of a pyramid scheme without the pyramid) to try to save money and keep it safe from robbers.

Without credit, America wouldn’t work. Businesses need credit in order to start and to grow. Why do you think it’d be different here in the developing world? Why do you think they are more like “teenagers with credit cards” than normal people trying to start a business?

This discussion is totally patronizing.

PS. People use microcredit to buy stuff to rent out, too. One popular business here is to rent out plastic chairs for people holding meetings. A household can live off of about eighty plastic lawn chairs. But they have to buy those chairs (where do they come from? China) first.

[Triskadecamus]

@threemae

Yeah, but the Nobel committee will never give out props for World of Warcraft, and god knows this board likes to discuss that, so I guess the question really is what the messed up priorities of the Nobel committee is.

Yeah. So, are you not going to be satisfied until the Nobel Comittee has a category for Goat Felching?

Tris

[Bridget_Burke]

@even sven

I’m living in an area where microcredit is a very real and important thing.

Thanks for giving us some actual information–not grousing from peevish Libertarian sites.

[Evil_Captor]

@Bridget Burke

Thanks for giving us some actual information–not grousing from peevish Libertarian sites.

Yeah, there’s a certain breed of libertarian who can’t stand to see poor people get any kind of help at all. All they can handle as economic do-gooding is tax breaks for the wealthy. I call 'em “It’s not enough that I should win – others must lose” libertarians. And conservatives.

[furt]

@According to Pliny

". First is the idea that poor should be self-employed rather than work for wages. That is contrary to the whole history of successful economic development.

This is ridiculous. It ignores the early modern period (as feudalism was undermined by the rise of an artisan class), early America and plenty

A fully modern, developed-nation economy is not possible without corporations, but the places where microfinance is used are lightyears away from that. Walk first, run later.

Second is the idea that loans are the main financial service needed by the poor, whereas they really need savings and insurance.

Even if anyone were claiming any such thing (they aren’t), this is idiocy. Providing A does not mean that B is unimportant.

Third is the idea that credit is what builds enterprise, whereas the truth is that entrepreneurship and management are more important.

Most microfinance agencies screen borrowers and train them in managing money. And again, asserting that poor people can benefit from one thing does not deny that they need others also.

Fourth is the idea that the non-poor don’t need credit, whereas the truth is revealed in market-based banking: higher incomes can handle higher debt.

More idiocy. Loaning to poor people does not preclude loaning to others as well.

Fifth is the idea that microcredit institutions can become self-sustaining, whereas all experience shows that new enterprises in poor areas that are built on credit alone rarely emerge from dependency.

Plenty of Fortune 500 companies engage in a continous cycle of borrowing; so long as they can make a return on the capital, it seems to me a perfectly viable business model.

There is nothing wrong with government subsidies, and in fact most all large corporations benefit from them openly.

Yes, to the detriment of pretty much everyone. Corporate welfare usually serves to prop up unneeded, inefficient or incompetent companies, frequently ones who curry favor with politicians.

[threemae]

@Bridget Burke

Thanks for giving us some actual information–not grousing from peevish Libertarian sites.

Hey, I’m a Libertarian and I’m strongly in support of microcredit programs. I think that most sane Libertarian organizations like the Cato Institute are. What better way to allow more people to engage in the free market?