4 Benefits of Microfinance

I recently read a book called “The Poor Will be Glad” by Phil Smith and Peter Greer.  This is where I learned about the concept of giving a hand-up, not a hand-out through microfinance and employment based solutions.  The book talks about some of the pitfalls of traditional aid to developing countries and teaches about the advantages of microfinancing and employment based solutions.  There is no one simple solution to eradicating poverty, but microfinance is the step in the direction of ending the cycle of dependance and restoring dignity to those living in extreme poverty.  Microfinance loans are aimed at empowering the impoverished, many of them women, to start their own businesses and to grow their money so they can achieve long-term financial independence.

Here are just a few of the benefits of microfinance:

1. As I mentioned; a microloan isn’t a hand-out.  It isn’t about just giving out money to the poor.  These are small loans that are paid back with interest.  Many people are skeptical when it comes to giving the poor financial loans.  However you may be surprised to learn that the average repayment rate of loans in developing countries is 98%!!  That’s why you can’t consider microfinance a hand-out, but rather, it’s a hand-up.  Many MFI’s require their clients to attend weekly support group meetings (or trust group) in which members keep each other accountable and provide support to one another.
2. It allows the poor to receive a loan.  Traditionally, the poor have been unable to receive loans because they don’t have anything to offer as collateral.  As a result, they get stuck in a vicious cycle of poverty, living and working in extreme poverty. Should adversity strike, they simply don’t have the means to combat it. Microfinance allows the poor to get the loans they need to save, invest, and create a sustainable lifestyle of financial independence and growth. These loans are used productively by the poor to create their own businesses, grow their assets, and get out of poverty once and for all.
3. It empowers women.  Many efforts of the microfinance industry are aimed at empowering women to create their own businesses.  From microfinance in India to microfinance in other developing countries, small loans are given to those women who live on less than $2 per day. By giving these poor women loans, the microfinance industry not only helps them pull themselves out of poverty, but it also promotes gender equality throughout the world.
4. It creates long-term financial independence.  The most important benefit of microfinance is that it helps create long-term financial independence in poverty-stricken areas.  It’s one thing to send money, clothes, and other goods to the poor.  It’s a great gesture, but the results of this traditional style of charity are short-lived.  Not only are they short-lived but they can also negatively affect the economy in that geographic region.  For example if a church decides to send a bunch of eggs and clothes to a town in India; the people are obviously going to take the free stuff.  Where does that leave the chicken farmer or the textile worker who are now unable to sell their product?  Microfinance loans help create sustained impact by educating recipients on how to create their own businesses and how to properly manage and grow their money.

Microfinance institutions are also involved in micro-savings, micro-insurance and micro-eduction, but I’ll talk more about those another day.  I’m not trying to say that all charities operating in developing countries are worthless and you should stop giving to them.  My hope that more people will become informed of the benefits of microfinance and consider the long-term sustainability of any donations they make to projects in developing countries.  For more information on Microfinance  check out the following websites:

http://www.opportunityinternational.ca/

http://www.hopeinternational.org/site/PageServer

Do We Really Know Poverty?

I’m reading a book called “The Poor Will be Glad” by Peter Greer and Phil Smith.  The basis of the book is using that microfinance and employment-based solutions to eradicate poverty. In Canada we don’t even know what it means to live in Poverty.  Even the poorest of the poor in Canada are living a much much higher standard of living than some of the more well off people in developing countries.  Last year my income put me below the Canadian poverty line, but I still managed to have a insulated, heated house to live in, clean water to drink, healthy food to eat, a car to drive and access to many luxuries such as TV, internet, movies etc.  Here are some statistics about what it really means to live in poverty:

• In developing counties 850 million people go to bed hungry every night
• 11 million children die everyday before reaching their 5th birthday
• 20% of the world does not have access to clean water
• In the developing world diarrhea kills between 1.6 and 2.5 million children every year
• In the least developed countries the literacy rate is 51%
• In Swaziland the average life expectancy is 30 years old
• More than half of all Africans do not have access to modern health facilities.  As a result more there are more than 10 million annual deaths from the four most common preventable diseases: diarrhea, acute respiratory illness, malaria, and measles.
• One billion people in the world live on less than $1 per day
• Two billion people live on $1 to $2 per day
• One billion people live on $2 to $4 per day

How can we know these statistics and not do anything about it?  We can’t.  Jesus left us with the Great Commission and the Greatest Commandment.  He demonstrated the perfect harmony of the two through his life and ministry.  He proclaimed the good news and made disciples and He loved others by healing their sicknesses, feeding them and setting them free.

We all can’t help but know that the Olympics are going on right now; especially if you live in Vancouver.  Do you think that people who live in developing countries know?  Or care?  If India wins a gold medal will that help the Dalits?  I don’t want to disrespect the athletes because I sure am not out there winning a gold medal for Canada, but seriously what’s it all for?  How much did Vancouver pump into the city getting it ready to shine for the rest of the world and for what?  For the entertainment of us sitting on our couches at home.  It just makes me nutty that some of these athletes will make huge sums of money on endorsements because they are “heros” to their country.  What about the real heros?  It all seems so backwards.  But we do live in a backwards world.  We can bring the Kingdom of Heaven to Earth by doing something that matters…and I mean REALLY matters!  God gave us all gifts, talents and abilities that we can use for His glory, so use them!

Photos by weheartit