Economics

Question
Do international micro credit programs provide an answer to the widespread poverty issues faced by third world countries Do these programs truly provide the necessary motivation for third world entrepreneurs to make a better life Additionally, does the success of these individual entrepreneurs provide enough change to bring about a higher standard of living for third world countries at large Or is it, instead, an isolated way for individuals to gain power and wealth in countries that will still struggle economically

One of the most profound problems faced by countries today has to do with poverty, especially in the third world. As many sociological researchers have found, people living in third world countries are currently fighting a losing battle to break out of a cycle of poverty. For these individuals, poverty breeds more poverty, as there is no motivation to work hard because a real solution is not in sight. In that type of rural society, nobody wins because nothing changes. The only way to bring about change is through outside influence, according to many. One way that people have helped to do this is through micro lending. Micro credit provided by people with expendable income gives some would-be third world entrepreneurs not only the money necessary for building up a business, but also the hope for a better future. This is a solid answer to many of the issues facing these countries, as it will help to raise the quality of life and standard of living across the board. Still, some questions remain about whether this solution is one that works for the entire nation, or if it is something that will only benefit an isolated number of people who receive the micro funding. There is no distinct answer to the last question as of yet, but researchers believe that micro credit is a step in the right direction in the fight against poverty.

One the things that must be addressed when considering this type of anti-poverty solution is its impact relative to other anti-poverty programs. Because time, money, and other resources are somewhat limited, poverty must be attacked using only the tools that make the most sense. According to an article by F.H. Abed, Microcredit programs are an effective policy instrument for reducing poverty among poor people with the skills to become self-employed. It also shows that such programs are more cost-effective than other types of antipoverty program (Abed, 2000). Though other questions about the usefulness of such programs remain up in the air, one thing that is certain is that there are individuals with both the skill and the desire to raise themselves up with the help of microcredit. These individuals live in rural areas where there is a vast need for a number of different businesses, which provides not only the opportunity for them to make a better life, but also the opportunity to provide necessary elements for people within their own community. One of the issues facing individuals in these countries is that they do not have the collateral to effectively bargain for credit from standard lenders. Since credit is one of the items that powers the modern business world and very few business ventures are started, even in the United States, without the help of financing, it figures that the lack of credit availability would stand in the way of individuals looking to start up new enterprises. According to that same Abed article, Such credits, which are otherwise unavailable to the poor or available only at exorbitant terms from moneylenders, enable poor households to undertake productive economic activities and provide an opportunity to escape the shackles of poverty (Abed, 2000). Because of the charitable nature of the microcredit lending effort, the challenges associated with collateral are put aside, as international lenders are able to derive tax benefits from their contribution and the loans are small enough that lenders do not mind the risk.

What some countries have come to find out is that microlending practices are only a start and do not provide the total picture of how to bring third world countries out of debt. Though having the starting capital to begin a business is better than not having that capital, the entire system works more efficiently when there is some direction. Thus is the case in Bangladesh, where microcredit programs are used in conjunction with other social development programs to achieve the maximum benefit for the people there. This serves to motivate the people of the country to successful open and run their own businesses, while providing them with the resources that they need to be successful. The obvious question of many is how well a business can hope to do if it is placed in the middle of a desolate area. With these socially driven initiatives, countries are providing guidance to potential business owners on what kind of businesses might succeed and how to effectively position those business for further success.

One of the reasons why micro lending has an opportunity to be successful is the volume of lending that is taking place at the current time. The issue in the beginning was that isolated giving did not seem to provide any sort of ability for a community to grow out of its poverty and into something better. Will one grocery store or bookshop really bring a rural population up The answer to that question is probably not, but the strength of the program seems to be in the numbers. According to a Sarah Blackstock article, More than 30 million micro-loans are disbursed worldwide every year-and they are increasing at an annual rate of 30 to 40 per cent (Blackstock, 1999). This type of growth has been exacerbated over the last decade by the rise of the internet, giving people a chance to contribute from wherever they happen to be. While the beginning of the process saw national charity organizations doing most of the word, there are now websites like LendforPeace.com that allow people to make their own small contributions after reading the stories of upstart entrepreneurs. This growth makes it possible for billions of dollars of micro lending to take place within a country, and people across a rural, poverty stricken community can benefit from that.

In looking at whether or not micro credit can spark a change in the motivation of individuals in third world countries, one starts to get into more anecdotal evidence than anything else. This is an important issue, though, as one of the challenges facing these countries is a feeling that there is no way out of the current set of circumstances. Sociologists claim that in order for those countries to find their way out of poverty, it will take a collective effort from a number of the countrys citizens. That type of collective effort will only come as a direct result of some type of excited society. Additionally, it will only come when societies feel as if everyone has a chance to be successful. One of the keys to the micro lending revolution has been empowering women in these countries. In many of these countries, women have no hope and no way of being productive, which drags down the overall productivity of the society. One story from the Asia Africa Intelligence Wire recalls the story of a woman living in the impoverished country of Zambia. The author of that article writes, In a quest for survival, she began sewing after hard-working days on the farms until she learnt of SHARE, an Indian micro-bank and obtained three loans from the bank with the first loan amounting to US80.  Today, Mariamama has revived her husbands dry land and she has an irrigated orchard of oranges and a rice field - a development which has turned around her life. She also owns four buffaloes, one calf and 17 goats (Asia Africa Intelligence Wire, 2004). These stories are not at all uncommon, and help to inject a sense of hope that has been visibly absent in the lives of people living in these countries.

In total, it is difficult to know whether or not entire countries will benefit from the microcredit lending that is currently taking place. Though the results show that many people have been successful with these loans and some rural communities have seen a positive change, it is still very early in the process. What is clear is that micro lending is a key part of the process, even if more help is necessary for bringing third world countries up. It may not be the final answer on the matter, but it is a piece of economic development that is adding something positive to the lives of those living in poor, rural communities, and it is a step in the right direction.