Choosing Life – Microcredit Economics
In delivering the final words to the Israelites before they entered the promised land, Moses proclaimed the often quoted words, ‘I offer you the choice of life or death, blessings or curse. Choose life and you and your descendants will live.’ (Deut. 30/19). Pope John Paul’s last message at Easter 2005 was an example of choosing life. ‘Give us the strength to show generous solidarity towards the multitudes who even today are suffering and dying from poverty and hunger.’ He was an opponent of communism and a critic of capitalism when these systems destroyed the life of people.
The Pope’s prayer is partly being answered through a concept called microcredit. An original idea conceived in Bangladesh by an economics professor, Prof. Muhammed Yunus, microcredit means giving credit and small loans to poor people who cannot get them from normal banks or other financial institutions. Professor Yunus founded the Grameen Bank (‘Grameen’ is Bangladeshi for ‘village’) in 1976 as an experimental project to combat rural poverty by providing credit to the poorest of the poor. By 1983 the Bank had started providing small collateral-free credit loans to the poor for income-generating activities. The process and set of criteria is clear and stringent. Some financial consultants said it would never work, you cannot lend money to the poor. By August 2004, the bank has disbursed $4.6 billion in loans to 3.8 million borrowers, 96% of whom are women with a repayment rate of 99%. It currently lends $2 million a day in small loans averaging around $200.This is good news and means a new life for millions.
The UN has designated 2005 as the International Year of Microcredit. Its overarching goal is building inclusive financial sectors to achieve the Millennium Development Goals, agreed to by all members of the UN in 2000.They are a set of eight goals to be achieved by 2015 and are an ambitious agenda for reducing poverty. Microcredit is critical to achieving the first goal – to halve the proportion of people who live on less than one dollar a day and halve the proportion of people who suffer from hunger. As UN Secretary-General Koffi Annan said at the launch of the Year of Microcredit, ‘Let us be clear: micro-finance is not charity. It is a way to extend the same rights and services to low-income households that are available to everyone else. It is recognition that poor people are the solution, not the problem. It is a way to build on their ideas, energy and vision. It is a way to grow productive enterprises and so allow communities to prosper. Let us use this special year to put millions of families on the path to prosperity.’
Despite the success of microcredit and micro-finance in reducing poverty and serving the poor in the past decades, there are still 400-500 million poor who lack access to financial services. That is, they lack access to credit on reasonable terms, safe means of saving, access to micro-insurance and other financial services.
Prof Yunus believes that poor people don’t lack the skills to provide a living for themselves. They lack the finance to invest in their work. His response to what seems now to be an obvious idea has been startling. Microcredit has spread across the world. Millions of dollars is being loaned and life is improving through people’s own efforts.
Flores, a Filippino, is an example of what is possible. A single parent with a high school background, she found herself unable to raise her daughter alone, selling vegetables and other items in the market each day. In 1991, she was invited to do a basic five-day training course in microcredit. Later she borrowed $P2000 (($NZ60) from the local Grameen Bank. Flores opened a shop, which initially did well. However, stress between her home and work lives meant that she fell behind in her repayments. A person from the Bank helped her refinance with another small loan and this time she kept up the repayments. She paid back her loan and the shop expanded more. She made enough money to renovate her shop and house. Flores is grateful to God for the opportunity to stand on her own feet through the microcredit scheme. ‘My own house was built of patchwork and junk. Now it is orderly and beautiful. I receive rent monthly, I have my own market stall and my shop is open every day. Finally, I was able to fund my daughter’s education. She is now a promotion agent. Nothing is impossible if we keep trying and trust in God and ourselves. We ought to be like the ants. They keep helping each other, storing and building. They are never in want, but they never stop or lapse into laziness.’
The concept of microcredit fits in snugly with the aims of the Catholic Worker. Economist E.F. Schumacher, author of Small is Beautiful, has long been a prophet recognised and appreciated in CW circles. Microcredit is a concept he would have found very appealing. Practising a ‘gentle personalism’ by definition almost means that the smaller the unit one relates to the better the human relationships involved, the greater control can be exercised and the closer workers can come to the products they are creating.
Microcredit can have a huge impact in thousands of small ways. As Professor Yunus says, ‘Every man and woman knows what they can do. Did we not manage the world for thousands of years without the global and transnational control?’
(Material collated from The Far East, May 2005)
Rich western countries spend up to 25 times as much on defence as they do on overseas aid and have increased their assistance to the poorest African countries only marginally since 1990, according to UN figures. In that 15-year period, per capita incomes in G8 countries have risen by almost $6000 per head, while aid has increased a mere $3 per head.
Every country in Western Europe and North America has a bigger military budget than overseas development budget, with the biggest disparities in the United States and Britain. Although the UK has increased its aid budget in recent years, the UN data reveals that for every $1 spent on development, $8 is spent on defence. In the US 1% – one cent in the dollar -goes on aid compared to 25% of the budget that is spent by the Pentagon. -15 July 2005, The Guardian Weekly