ezekiel's chariot - 張敦楷 (pjammer) wrote,
ezekiel's chariot - 張敦楷

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Fighting Poverty Through Microfinance

As a small-l-libertarian, I distrust income-redistribution-via-taxation schemes; while well-intentioned, I believe they distort incentives ... stunting personalty traits of thrift, industry and initiative essential to lifting the impoverished from their circumstances.

Fred Reed's Whimpering About Poverty: Maybe You Should Try The Real Thing points out:
Poverty is a condition characterized by a lack of money. Shiftlessness involves a lack of backbone, morals, independence, self-respect, and drive. They are not the same thing. Of course, if you are shiftless, you are likely to be poor.

Indeed, attempts to 'cure' income disparity through confiscatory taxation have the unintended and highly undesirable consequence of killing startups at the cradle (and its associated jobs and innovations).

African economist James Shikwati blames much of Africa's problems on the massive aid it receives from the international community.

Shoveling money at poor people often worsens the problem.

So what does works?

Microcredit is based on the radical idea of loaning money to the desperately poor, with the intention of bankrolling self-sustaining businesses. Popularized by Muhammad Yunus (a U.S.-educated economist), who offered small-denomination loans to destitute but ambitious people in Bangladesh, Microcredit's success lead to the foundation of the Grameen Bank, which has since loaned out over US$5 billion worth of loans to over 4 million borrowers, and enjoys a 97%+ repayment rate.

Beyond banking, Grameen advocates sustainable lifestyle choices for its members and has been instrumental in helping women break the cycle of poverty and financial dependence on their male relatives.

Fascinating stuff ... both as a business model and as a replicable method of offering lasting help to those in poverty.

Those of you who feel strongly about the idea may also want to check out Grameen Foundation USA, a US-based nonprofit that seeks to share the microcredit boon with the world.

And now ... to bed.

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