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MICRO CREDIT RELIEVES THIRD WORLD POVERTY PDF Print E-mail
Written by Jim Jordal   
Monday, 09 April 2007

MICROCREDIT RELIEVES THIRD WORLD POVERTY

By Jim Jordal

If your brother has become poor, and his hand can't support him among you; then you shall uphold him. As a stranger and a sojourner he shall live with you. Take no interest from him or profit, but fear your God; that your brother may live among you. You shall not lend him your money at interest, nor give him your food for profit. I am Yahweh your God, who brought you forth out of the land of Egypt, to give you the land of Canaan, and to be your God. If your brother has grown poor among you, and sells himself to you; you shall not make him to serve as a slave. As a hired servant, and as a sojourner, he shall be with you; he shall serve with you until the Year of Jubilee: then he shall go out from you, he and his children with him, and shall return to his own family, and to the possession of his fathers.

Jubilee law regarding loans to the poor and release of indentured debtors, Lev. 25:35-41 (WEB)

In these days of massive development schemes created by greedy rulers and transnational corporations financed by the World Bank and various export-import banks, it's nice to hear of a movement that's small, effective, and human-centered. We're speaking of what is known as microcredit, or the loaning of small sums of money to local entrepreneurs for use in starting small businesses or just in enabling families to survive.

The concept began in 1976 when Muhammad Yunus, a Bangladesh economics professor, took out a personal loan so he could lend small sums to poor people previously refused credit by existing banks. He realized that poor people in the Third World were not what the dominant commercial system thought--lazy, irresponsible, dishonest, unskilled, and lacking in either intelligence or ability. The poor people in his native country were none of these things--they were just without money. Worse yet, there was little chance of gaining any funds for even minor investments because mere survival used up any available resources. Besides, commercial banks would not lend to such persons because they were considered bad credit risks, so the only credit available was from shady loan agencies and individuals demanding exorbitant interest rates and using strong-arm methods to collect overdue loans.

By 1983 this effort had become the Grameen Bank, well known in microcredit circles. It has tens of thousands of branches, millions of borrowers, and a 98 percent repayment rate. Grameen-type banks have grown up throughout the developing world, and have begun drawing the attention of commercial banks and international aid agencies. So from one man's insight and generosity has grown a people's banking system capable of changing the face of Third World poverty and economic development.

A general example of someone needing micro-credit would be a poor woman with a large family living in a poverty-stricken, isolated rural area or small town in any developing country. She has many survival skills, but no way to use them to earn enough money to get ahead. What little money she does get goes for immediate survival. What she needs is a little help to get her foot on the first rung of the ladder to economic decency. Soon, a microcredit "bank" forms in her area, and she goes to find out what help is available. She discovers that in order to get a loan she must find several other women with whom to form a support group. The bank will loan only to a fraction of the members, thus creating a group dedicated to productive use of the funds and prompt pay back, since they know that if their members do not repay these loans, there will be no further credit.

The woman might borrow the equivalent of $40 for the purchase of a sewing machine. She could then fill orders from others too poor to afford a machine, thus making a small amount sufficient to start her on the path to economic sufficiency. Sometimes it's a small machine, other times a cow or goat, sometimes a small building, but always something desperately needed to begin the rise out of poverty.

So why didn't regular banks and the mighty World Bank and International Monetary Fund begin this type of lending years before? Call it what you will: blindness, arrogance, greed, flawed development policy, excessive reliance of markets; all have limited the ability of large financial institutions to perceive the problem and its potential solution. Western bankers and aid agencies generally think only in terms of massive projects like energy-producing installations and mega-farms, funded by billions of dollars and directed by westerners already thoroughly beholden to classical market economics.

So here we have another Jubilee program working to deliver people from extreme poverty. It's too bad that individual and small group reformers must generate the reforms that should and could be coming from international lending agencies and powerful governments. But that's always the way it seems to be.