Image by uncultured via FlickrMicrofinance is no magic bullet. Microfinance alone can't cure poverty. Good governance, I think, is the first precondition. Yunus saw that. That is why he tried to launch a political party in Bangladesh a few years back. But looks like the politicians in Bangladesh have managed to unlaunch him instead.
You want good governance, and you want education, health, and job creation. Most of the poverty in the world will be cured because good governments in place invested heavily in education, health and job creation. They created the environment for the private sector to come in and create jobs.
Those are the optimum conditions in which microfinance can best thrive.
Entrepreneurs are few and far between. Most people prefer to go work for someone else. The urge to start a business is not even close to being universal. That is true for New York City that seems to have such a high density of well educated people, and that is true for America at large, and that is true for the rest of the world.
I don't think it is realistic to think you will go into some village and give small loans to everyone in the village and expect them to all launch small businesses. That is not a viable thought process. You are asking the illiterate to do what the super educated don't do.
The challenge for microcredit programs is to identify entrepreneurs. You are not saying just because you are poor, I think you are an entrepreneur. What you are saying is if you are an entrepreneur, I don't care that you are poor, and you got no collateral.
Microcredit is like primary education. Primary education alone is not enough. People also have to go to high school. People also have to graduate and go to college.
Some woman might get a $100 loan and become a chicken farmer and start generating income. But if she is not living in a well governed village, and if she is not going to get a chance to educate herself through adult education programs, if she is not going to have access to health services, she is always only one small mishap from falling right back into poverty. And the chances of her going on some day to be able to qualify for a $1000 loan are really small.
Illiterate people who might get that first $100 loan are going to have to work to get literate. Literate people who might get that first $100 loan are going to have to figure out a way to further their education.
I believe in good governance, in education, in health. I believe in job creation. But my startup is not into any of those. Microfinance is a full plate. But I don't see how outfits like mine alone can cure poverty. The other pieces of the puzzle are also going to have to fall into place.
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