The Z Spot

Wednesday, June 25, 2008
Microlending
Alright. I know I’m like two years behind the rest of the web in expressing my support for this concept, but I thought I’d take a minute to talk about microlending and microfinance, and what it can do for the world.

First of all, we all know governments are inefficient. We know that for every tax dollar spent on foreign aid, only a portion of it actually gets to people. Most of it is spent on the expenses of distributing the aid, both in the donor/lender country and in the recipient country. Lending money through small organizations is much more economically efficient.

Also, where does that aid go? Yes, it’s great to have roads and power plants, and schools, etc. But, those changes usually affect the urban populations of developing countries, and, although far from wealthy, those people are often better off than the rural poor. Also, what good does building a school or a road or a hospital do if the people can’t afford cars, or don’t have enough economic activity to maintain those facilities? What good is a school and a hospital when families are making their kids work for survival, rather than sending them to the school and eventually to medical school?

So, from a development standpoint, microlending is a great partner for foreign aid and investment. It allows individual people to take accountability for their economic state, and, bit by bit, allows them to improve their lot. It doesn’t give them a fish, it teaches them to fish. By pairing this bottom up, slow approach with the top down, quick treatment that foreign aid and international lending gives, we can all hope that eventually, the two meet in the middle.

Moreover, I firmly believe that people who have received help and loans from individuals (within their country or outside of it) will feel some sense of responsibility, once they have improved their own lives, to do their part in helping the rest of their community.

Also, microlending within the U.S. can be a great way to invest at higher rates of return than banks offer, and to receive loans at lower rates than banks charge. Although the lending option is temporarily down, www.lendingclub.com offers that kind of opportunity. Again, eliminating inefficient bureaucracy benefits both the lender and the borrower.

So, I would urge everyone to check out these two sites when you get a minute:
www.kiva.org
www.lendingclub.com
Posted by Zach at 2:32 PM 0 comments Links to this post
Labels: development, kiva, lending club, micro credit, micro finance, microloan

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