Tuesday, January 15, 2008

What's Wrong With Microfinance? It Doesn't Create Billionaires

A little reporting on Muhammad Yunus's current book tour from The Houston Chronicle:
The model of loaning small sums to the working poor has been duplicated across the globe by for-profit and nonprofit organizations. That global contagion of microloans helped lead to Yunus and the Grameen Bank winning the 2006 Nobel Peace Prize.

But the microcredit movement has its critics.

"The biggest myth about this is that it goes to start a business," said Thomas Dichter, the co-editor of What's Wrong With Microfinance?

Borrowers use the money to survive, by earning a few pennies a day, selling bags of rice or cups of tea, he said.

"Let's not make the mistake that these are mini-entrepreneurs or future Bill Gateses. They are not," said Dichter, an international development consultant. "They are just trying to get by."
I wrote about Dichter's attacks on microcredit recently, and here he goes again. But this attack is pretty transparent, isn't it? Poor people in Bangladesh who borrow money from Grameen Bank may indeed "get by" by "selling bags of rice or cups of tea." That is the kind of stuff you sell if you own a store in a village in Bangladesh. It happens to be a pretty good way to feed and clothe your family, which I consider definitely preferable to letting them go hungry or naked.

But apparently in the view of Thomas Dichter, an oh-so-serious serious development expert, this is unsatisfactory. Instead, the often illiterate women who are clients of Grameen Bank ought to be striving to become "future Bill Gateses." Someone should tell them to get cracking on developing new computer operating systems. They can sell the software out of their tin-roofed roadside shops.

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