A balanced approach to combating poverty is still what we need most.
It’s hard for me to believe that only a while back, I had to define the concept of microfinance to friends whenever I brought it up (it was hard for them to believe that I wanted involvement — willing, conscious involvement — in anything with the word “finance” as its root, but let’s put that aside for now). That’s hardly the case anymore. Microfinance has enjoyed a steady boom in its popularity in recent years, due in part to extensive media coverage and celebrity philanthropists’ support.
Natalie Portman ’03 has said that it is “amazing that the world is not investing more in this resource.” All the attention being paid to microfinance has attracted the attention of some powerful people. Muhammad Yunus started Grameen Bank with loans totaling $1,134 dollars split between 42 families. Now, companies like SKS Microfinance are pursuing for-profit microfinance on the scale of hundreds of millions of dollars.
Is for-profit really the way to go? And is microfinance going to be, as some have suggested, the ultimate elixir to cure world poverty?
There is debate over what Connie Bruck, in an article for the New Yorker, characterized as a “conflict, between pure do-gooders and profit-minded do-gooders,” and both sides have garnered support for their ideology.
Muhammad Yunus, winner of the 2006 Nobel Peace Prize for his founding of and work with pioneering microfinancer Grameen Bank, has been critical of the profit-minded approach: “You make money somewhere else. Here, you come to help them. When they have enough flesh and blood in their bodies, go and suck them, no problem. But, until then, don’t do that. Whatever money you are taking away, keep it with them instead, so they can come out more quickly from poverty.”
Yunus’s conservative stance is not a result of an aversion to profit-minded endeavors in general, but rather a result of suspicion that the profit motive might distract from the ultimate goals of microfinance. I share Yunus’s worry about “mission drift.” Helping others improve their lives should be the goal, not a goal of microfinance; it is difficult enough to help people pull themselves out of extreme poverty without expecting to turn a profit in the process.
I also have qualms with the extreme optimism about microfinance; optimism that has taken focus away from other areas of poverty relief that are equally or more important. We’ve all heard about how a microloan can change a life. I hear about the woman in Uganda who received a microloan and was able to leave her abusive husband, is putting her children through school, and is employing other women in her village for her small business, and I know that that’s a change in which I’m interested.
Shooting high is an effective way of assuring high-performance, but when microfinance is held up as the ultimate means by which to achieve global poverty eradication, potential supporters and clients will be devastated when statistics show substantial improvements in individual lives and villages, but not dramatically reduced poverty on a macro level.
In order to salvage practicality and efficiency, it may be necessary to forgo idealism. People are going to fall through the cracks. Not everyone is in a position to benefit from a $100 cash loan. When economies have pancaked, governments have been corrupted or destroyed, areas have been devastated by drought and famine, populations have been made answerable to criminal syndicates — these are situations where the problems have come from the top down. Solutions need to come from the top down, in addition to through bottom-up action.
Microfinance is a great idea, but we need more great ideas and solutions to the problem of extreme poverty. If enthusiasm for microfinance stops us from addressing at real social problems through a different lens, then it can conceivably do more harm than good.
Karla Cornejo ’11 (kcornejo@fas) doesn’t believe in cure-all elixirs.