In the 1970s a new method of helping the poorest people in the world emerged: microlending. The idea is to give the very poorest people, those who live on less than two dollars per day, very small loans they can use to start businesses and serve their community. Thanks to the power of success stories and anecdotes of those helped by microlending, the idea caught on with philanthropists and governments in the west. The concept enjoyed the full throated endorsement of the Clintons, The Nobel Committee, the United Nations, and experts working in global development. But a dark side of microlending quickly emerged. Some loans came with unreasonably high interest rates. Certain microlending institutions harassed and threatened those who couldn’t pay. Some of those who received small loans found themselves trapped in a debt spiral. The indebted even committed suicide to escape the loan. While this was going on, some owners of microfinance ventures profited to the tune of millions of dollars. In the 2010s, multiple studies began to discover that the benefits of microlending as a poverty cure were vastly oversold. Microloans could in fact improve a community’s economic base in certain situations. But they cannot and will not end poverty entirely, as its advocates claimed decades earlier.

How did the most powerful, wealthy, and influential people in the world buy into the exaggerated promises of microlending?

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Written by Travis View. Theme by Nick Sena (https://nicksenamusic.com). Additional music by Pontus Berghe & Nick Sena. Editing by Corey Klotz.

REFERENCES

Banerjee, Abhijit and Duflo, Esther (2011) Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty

Bateman, Milford (2010) Why Doesn’t Microfinance Work: The Destructive Rise of Local Neoliberalism

Edited by Bateman, Milford and Maclean, Kate (2017) Seduced and Betrayed: Exposing the Contemporary Microfinance Phenomenon

Collina, Daryl et al (2009) Portfolios of the Poor: How The World’s Poor Live on $2 a Day

Meyerowitz, Joanne (2021) A War on Global Poverty: The Lost Promise of Redistribution and the Rise of Microcredit

Rahman, Aminur (1999) Micro-credit Initiatives for Equitable and Sustainable Development: Who Pays?

http://users.nber.org/~rdehejia/!@$devo/Lecture%2006%20Microcredit/extra/RAHMAN,%20A.%20Micro-credit%20initiatives%20for%20equitable%20and%20sustainable%20development%20who%20pays.pdf