Following on from my previous post I have some further reflections and musings on microfinance. Through our Highgrove collective we’re experimenting with lending as a group of people based on a number of shared principles. We’re lending close to $3000 according to three P’s:
- People of God
- Poorest of the Poor
With millions of dollars being lent through many of these mfi’s (microfinance institutions), I’m sure that there will be some who will abuse the system. Hopefully we will be sheltered from some of this risk by lending according to these principles. Some of us also have a particular connection or resonance with a particular country or people group and lend accordingly.
People of God; Persecuted; Poorest of the Poor
What I like about microfinance:
It’s a hand up not a hand out – Traditionally lending through the world bank et al is top down (and often poorly managed and poorly distributed so that the poorest never see the benefit). This is bottom up: a small loan can be what it takes to help someone out of poverty.Foreign aid often goes into large, expensive (and often wasteful) infrastructure projects that are supposed to help the poor ‘in the long run’. “But”, as Muhammad Yunus 1 points out, “in the long run you are dead.” And nothing trickles down to the poor. Roads and bridges, for example, are useful. But they only become meaningful when the poor are in a position to take advantage of their existence – too often the enabling action to make this possible is entirely missing. Yunis, reflecting on this, wonders whether $100 put into the hands of the poorest 10 million families in Bangladesh would result in more targetted investment into capital income-earning goods or, at very least, be spent locally on goods and services. Perhaps this would be $1 billion better spend than on large infrastructure projects.There is a significant danger that many forms of foreign aid become a kind of “charity for the powerful, while the poor get poorer.”2
It’s based on trust – the upside-down principle of microfinance is that there is rarely a lot of paperwork associated with it. Whereas a traditional bank builds its entire edifice on a basis of mutual distrust (‘you may not pay us back so we better get you to provide assets that we can legally seize if you don’t repay’), microfinance succeeds or fails depending on how strong the personal relationships are between the lender and the borrower. I like that.
It’s wise stewardship – traditionally you give a gift once. Here you get to lend once and when you receive this back you can lens it out again. A one off payment can be recycled dozens of times and the good that results is multiplied!
It’s fun lending with others! – Together in our little Highgrove collective we’re able to discuss potential loans together and pray for those people to whom we’re lending – the power of the collective means that so far we’ve been able to lend close to $3,000. Over time, as most of this is repaid, we’ll be able to lend this out again and again. We also get to see the repayments come in month after month.
It’s a sustainable solution – There are different tiers of need: many people (e.g. Haiti) need immediate relief and giving to this os wholly appropriate. Many, however, are face with structural and inter-generational issues that sere to keep them oppressed and weighed down by poverty. These people don’t need a hand out but a hand up, and microfinance initiatives like the one we’re involved in present just such an prospect.
Where will it end? A focus on a particular country so that we can, as a group, transform the fortunes of a particular geographic area?
Will we, in time, develop strong links with a particular mfi? Could we even start our own mfi?
Who knows – but it’s an fun journey!