Monday, November 26, 2007

Microfinance - An opportunity for millions

Have you ever wondered why there are people in the some parts of the world who earn less than $2/ day? Why can’t these people break the shackles of poverty and come to the mainstream and live like us?

In my opinion the one word answer for the questions above is "Opportunity". Opportunity means access to credit, access to health care and access to education.There are lots of areas in the world where people don't have access to basic necessities of life.

A large population in the US has a net worth and savings rates in the negatives, but they can live a decent quality of life in spite of being buried in debt. I am not advocating that being in debt is a good thing, but having access to credit provides the borrower to chance to repay debt again and again. In the backdrop of this macro environment, a slew of debt consolidation services are available that helps a borrower with his debt obligations.

Among the people who earn less than $2/ day, many are sincere, honest people who probably would not misuse the credit opportunities avail to them but sadly enough; they have had no such opportunities to break through the vicious cycle of poverty

It is our expectation that governments in developing countries should take a lead and provide opportunities to poor people. I agree the government can be a facilitator and help with favorable regulations but every organization whether profit or not profit needs to be self sustainable without government intervention. So, if a long term solution to education and health care are sought these organizations must be self sustaining. Similarly for people to benefit in the long term and break the vicious cycle of poverty, they must not receive donations but sustained credit access that grows as the repayment grows.

This principle was tested by Muhammad Yunus, a renowned economist from Bangladesh and Grameen(Rural) Bank was born. He has started an industry called micro finance and is now practiced in many countries around the world. Leading Banks like ICICI Bank, Citibank are now offering a range of products related to Micro finance in countries like India, Pakistan, Bangladesh, Boliva, Brazil, and Egypt.

In the next few posts, I will describe ways for people in the developed world to be a part of this fascinating industry and in the bargain help needy people create sustainable economic livelihood for themselves.

No comments: