Are Microloans Poverty's Quick Fix?

This week, Slate posted an earnest Q & A about the interest rates that Kiva and other microlending sites charge to help alleviate poverty around the world.

Kiva has received a lot of kudos (and criticism) for making altruism easy--anyone with a computer, credit card and a minimum of $25 can directly help a poor entrepreneur halfway across the world. They can charge interest rates as high as 30 percent, which sort of kills the do-good buzz. Meanwhile, donating to charity, feels less personal and is potentially less efficient than distributing money through microlenders.

Slate points out that alleviating poverty isn't black or white:

[Experts say] there's a need for more research (particularly longer-term randomized control studies), and that even if we don't find a societal benefit, that that's not necessarily a good reason to cast it aside. Microfinance expert David Roodman points out that the authors of Portfolios of the Poor: How the World's Poor Live on $2 a Day suggest that the biggest challenge of poverty isn't necessarily how small your income is but rather how variable and unpredictable it can be.

Microlending's Nobel Prize nod has led a lot of people believe that funding families on an individual basis is the answer to global poverty. But even Kiva readily admits that there's no easy fix to eradicating poverty.

Is this an obvious conclusion? Impact wants to hear about your experiences lending or donating to a cause. Which one is your pick?

Comments

[Tom AF Anderson]

What the article doesn't mention is that the interest rates that accrue for the microloans go to support the companies that provide the microloans. In turn, the companies put that money towards the salaries of microloan consultants who work to ensure that the business plans of the potential borrowers are solid. To make certain that the loans are paid back, it is not simply necessary to give loans to anyone, but it's also necessary to be sure that the loans will be of much greater benefit to the borrower. It isn't easy or cheap to hire a good business consultant, yet this is what the microloan corporations provide, and indeed it is the reason I think they can do something for poverty.

By making experts available to the poor along with the funds to support the plans, microloans make the impossible possible.

[Auren Kaplan]

Will micro-lending prove not to work? As of yet, we don't know But for goodness sake, let's give it a serious try. Nearly everyone has an extra $25 lying around, if not $100. Maybe 20 years from now they'll say the impact from microlending wasn't as as great as people thought. But maybe they'll call it the one social policy that was able to change the world. If you have $25, you should absolutely donate it to Kiva and let the entrepreneurs work. You may just be changing the world with your click.

[LightShadow62]

So Kiva starts out with a wonderful idea then takes a dump on it by figuring out how to make a profit.

[Doug Flight]

It's not a quick fix YET.

... Certainly a worthwhile cause.

http://www.villagebanking.org/site/c.erKPI2PCIoE/b.2394109/k.BEA3/Home.htm

[brady61995]

theres 10 people and enough food for 8, 2 go hungary. can we spread the food for 8 to 10? yes for now but as the population continues to grow and we exhaust natual resources it will get worse perpetually. there is no solution

[miamivalleyjournal]

While I won't go so far as to say that my looming graduate-student loan debt has precluded me from giving, I will say that I am less likely to donate to charity than when I was working full time. I find that donating my time is often the best way that I can support a charity. This is especially true since school supplies and books typically set me back about $2k annually.