Interesting article about microfinance and whether it significantly makes a difference to the lives of the poor. While Ruper Scofield, Peace Corps volunteer, saw it as a way out of the poverty trap in Guatemala, others could not find a strong causal relationship. Then again nothing is ever black or white. The fact that there are still many successful stories prove that there is a grand possibility for change, given time and the suitable factors and application.
Excerpts taken from The Guardian:
A market in Guatemala, the country where the CEO of the global microfinance organisation Finca first saw the benefits of extending credit. Photograph: Kevin Rushby
[…] But Scofield’s story didn’t end there. “I’d read all these terrible stories about how foreign aid is stolen and wasted and so forth, but this really worked. It had an immediate impact on the welfare of the people and it was cheap. But what really made an impact on me was that, when the time came to leave, the people were terrified. I realised that we’d made a real difference.”
The realisation stayed with him. Today, Scofield is president and CEO of the Foundation for International Community Assistance (Finca), a global microfinance organisation he co-founded with John Hatch in 1984 to provide savings accounts, loans and other financial services to some of the world’s poorest communities. A shaping influence in the evolution of the village banking model, the group has a loan portfolio of more than $500m extending across five continents. From small beginnings to great things, as they say.
Except, of course, it’s far from clear microfinance is a great thing. When the UK Department for International Development (DfID) commissioned a study of its impact (pdf), the report’s authors concluded: “Despite the apparent success and popularity of microfinance, no clear evidence yet exists that microfinance programmes have positive impacts.”
The review also cautioned – pointedly, when one considers the above story – that “while anecdotes and other inspiring stories purport to show that microfinance can make a real difference in the lives of those served, rigorous quantitative evidence on the nature, magnitude and balance of microfinance impact is still scarce and inconclusive”.
Read more here.
Forget China: the $10 trillion global black market is the world’s fastest growing economy — and its future.
An interesting article about System D where “inventive, self-starting, entrepreneurial merchants who are doing business on their own, without registering or being regulated by the bureaucracy and, for the most part, without paying taxes, are part of “l’economie de la débrouillardise”. Basically, an economic system “under the radar.” Ruled by the spirit of organized improvisation, System D is growing faster than any other part of the economy particularly in developing countries.
“It was the economy of desperation. But as trade has expanded and globalized, System D has scaled up too. Today, System D is the economy of aspiration. It is where the jobs are. In 2009, the Organisation for Economic Co-operation and Development (OECD), a think tank sponsored by the governments of 30 of the most powerful capitalist countries and dedicated to promoting free-market institutions, concluded that half the workers of the world — close to 1.8 billion people — were working in System D: off the books, in jobs that were neither registered nor regulated, getting paid in cash, and, most often, avoiding income taxes.
The growth of System D presents a series of challenges to the norms of economics, business, and governance — for it has traditionally existed outside the framework of trade agreements, labor laws, copyright protections, product safety regulations, antipollution legislation, and a host of other political, social, and environmental policies. Yet there’s plenty that’s positive, too. In Africa, many cities — Lagos, Nigeria, is a good example — have been propelled into the modern era through System D, because legal businesses don’t find enough profit in bringing cutting- edge products to the third world. China has, in part, become the world’s manufacturing and trading center because it has been willing to engage System D trade.
[…] And it comes to this: The total value of System D as a global phenomenon is close to $10 trillion.” (The U.S GDP is about $14 trillion)
Source: Foreign Policy