Micro-credit

This week there is a Global Micro-credit Summit going on in Halifax. Delegates from 100 countries are meeting here to discuss their goal of helping 100 million of the world’s poorest families with small loans. There are so many things that I am completely ignorant of. I hadn’t heard anything about this until I saw signs welcoming the summit to my city. I didn’t know that the 2006 Nobel Peace Prize had been awarded to Professor Muhammad Yumus and his Grameen Bank for their micro-credit program.

I tend to be a little cynical, so I googled the words “Grameen Bank” and “interest.” I found this article that explains the features of Grameen’s micro-credit programs.

I was thinking about Africa and the loans made to African countries that put them so badly into debt. They helped the lenders more than the borrowers. One major difference there was that countries were loaned humungous amounts of money, which accumulated huge sums of interest. With micro-credit, individuals were loaned rather small amounts of money to help them with business initiatives to support themselves. Another difference is that micro-credit loans are usually made through non-profit organizations or institutions that are primarily owned by the borrowers. The article goes on to explain that when it is through for-profit organizations, “efforts are made to keep the interest rate at a level which is close to a level commensurate with sustainability of the program rather than bringing attractive return for the investors.” No mention is made of the interest rate for non-profit organizations, so perhaps it is either non-existent or extremely low.

The website goes on to explain some of the philosophy behind Grameen Bank’s programs. They believe that the poor are not poor as a result of lack of skill, but as a result of policies and institutions that must be changed. I especially liked what the article said next.

“Grameen believes that charity is not an answer to poverty. It only helps poverty to continue. It creates dependency and takes away an individual's initiative to break through the wall of poverty. Unleashing of energy and creativity in each human being is the answer to poverty.”

This is not to say that if a poor person wants to get out of poverty badly enough, they should be expected to do it alone. There are obstacles in place that we need to change and remove, and in the meantime they need a hand as they step over them. A small loan with low interest is such a hand. I think that until impoverished people are able to support themselves, there will be a place for charity. It is good to give to the poor, but it is better to help people help themselves. This will break the cycle of poverty.