This will be a space for us to share our thoughts and ideas on how to reduce and eventually remove poverty from this World.
The biggest thing that differentiates poor and the rich (even in a free society) is not the material things each owns, but something that we take for granted. Opportunities abound for everyone in a free society, but it is always easier to convert $1 Million into $2 Million, than to convert $100 into $200. But what if you don’t even have $100. If I have $1 Million every financial institution will want to give me more money. But if I have a total sum of $100 with nothing else to show a financial institution, I will get no money.
Thus it is the “access to financing” that greases the wheels of society whether one has $1 Million or $100. And it is the absence of this “access” which is the biggest obstacle for the poor to grow out of poverty.
In terms of creativity and ideas, we are all very creative. But the poor are relatively more creative simply because they have to be. If a person with means has a need, that person just goes and buys the product and satisfies the need. For a person with little or no means when a product is not available to satisfy their need, an alternate solution must be found. Hence this process of improvization and coming up with unique solutions makes them more creative and inventive.
About 30 years ago, Prof. Muhammad Yunus ( founder of Grameen Bank ) accidentally discovered the concept of Microcredit by doing an experiment in the rural parts of Bangladesh. In trying to prove a point, he discovered that poor people – who have no collateral to show, hence did not have access to financing – are one of the most creditworthy clients in the World.
If I am poor and everyone thinks that I will amount to nothing because I have nothing. But I am creative and want an oppotunity. If someone came along, showed faith in me and actually made a loan to me – I will do anything to prove that their faith in me was well founded. Thus instead of just a financial transaction, I am entering into a personal transaction.
That is simply the basis of microfinance. No collateral is used to secure the loan, it is just the faith in an individual or a group individuals who have a desire to succeed.
These loan amounts are not $100,000 or $10,000 or even $1000. The loans are tiny sums as low as $20 to $500 – thus the term “Micro”. We might ask – and what would I do with $20. In the developed world or in the eyes of the rich, $20 is so small a sum that we might not even notice what one can buy for $20. But for a person in the developing world $20 could go very far.
For $20 one could buy a sheep, milk it and start selling the milk to make enough money to put bread on the plate and repay the loan.
For $20 one could buy a blender and some fresh fruit an start selling fresh smoothies.
For $200 one could stock enough groceries to start a very small store in a village of 200 people – where the closest grovery store was 3 miles away.
The income generation ideas are limited only by our imagination. People have started sewing, shoe shining, cellphone renting, bicycle repairing, gardening, etc.
And once we are generating an income – life is good. And that is the basis of microfinance.
Attached are links to orgnizations that are working with micro-enterpreneurs across the globe – enjoy the stores
business articles 