I think this whole concept is fantastic. It is the perfect marriage of modern, low cost computer accounting technology and the needs of real people stagnating in poverty.
It removes an element of global charity we know does not work on long term poverty problems; the current process of giving money without reservation. It is no surprise that poverty pimping bureaucracies will resist this tooth and nail. They make money, while passing out other people’s money. They can take the credit for being good global citizens. That is liberalism at its worst.
Apparently, not everyone is on the train, as is described in this Hindu Business Line article by Sudhirendar Sharma:
IT is a two-edged sword. While it supposedly takes the rural poor into a new domain of economic freedom, it keeps the corporate sector hopeful of exploiting this freedom. It helps the formal banking system shun its prime task of extending credit to the rural poor, ...
As we all know the 'formal banking system' is really working wonders is it not? Please.
... but provides the necessary refuge to politicians from uncomfortable questions about generating jobs for the unemployed.
Here is the classic liberal view on Government hand holding. He thinks it is the duty of politicians to create jobs; Not the duty of free entrepreneurial people.
It is a sword conveniently wielded by both by the donors and the governments to create an illusion of freedom, growth and development.
I have news for you, Sudhirendar. If people have a job, growth, development and the freedom to spread it around, they will not care whether you think it is an illusion or not.
Considered a panacea for poverty eradication, micro-credit is the current buzzword for economic emancipation.
Then he goes on to use liberal buzz phrases like 'trapped in a debt-cycle' and 'market exploitation'. He goes on and on about how it is just an evil global corporate conspiracy to elevate the poor from eating dirt, just so they can exploit them, by selling them cell phones and consumer products.
With microcredit, they will be denied the soul lifting dignity of begging for food from state bureaucrats and global liberal charities, between loans from Guido the kneebreaker.
Microcredit means microrisk. Providing a large pool of investor resources, giving out small loans, spreads the risk into statistical obscurity. As long as the majority recipients re-pay, in good faith, everyone benefits. The economy benefits. The person without collateral or means, gets more just than a hand out.
This type of system has a serious psychological benefit. People will be trusted with a little bit of responsibility. People are given that little piece of trust, without reservation.
They get the ability to borrow, without becoming a slave to black market forces.
They get exactly what the global liberal charities always claim they want for people; a chance to prove themselves and engage in self sustaining productivity. A claim is one thing, the reality is another.
Because it is not a pure charity, the microcredit system is not a black hole. The money does not disappear forever. When people pay those loans back, that money is rolled into other microcredit loans. This can become an engine of genuine economic liberty. It also means a relatively small amount of seed capital can grow quickly into loans for people who may have never gotten any assistance from a dried up charity.
It is not about a raw pool of money. It is about establishing the circulation of money. It is about creating a self-sustaining economy.
People who understand this are people who know how to fish, instead of just taking a fish, then coming back for more.