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| Philanthropy |
Priming the Free Enterprise Pump
Jan Alexander
02/02/2004
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Shark-free Finance
The actual practice of lending minute sums of money to subsistence farmers, fishermen, herders, weavers and market vendors is as old as civilization itself, but in ancient valleys and villages the loans were bestowed by local usurers who would charge interest rates as high as 20 percent a day and perhaps add the indentureship of a first-born child. Without the backing of a micro-lending agency, similar loan-shark arrangements are pretty much the only capital source available to the uncollateralized poor even today. Muhammed Yunus, the economics professor who founded Grameen— which means village or rural—in Bangladesh after the 1974 famine, believed that small loan programs with plenty of community support could help the poor start sustainable businesses and lift their families out of poverty.
The microfinance industry has become
large enough that the likes of Deutsche Bank
and Citibank have found it a viable model
for social investment funds. |
It is significant that close to 80 percent of all micro-loan borrowers are women. World Bank studies have found that men in impoverished countries (with exceptions, of course) are more likely to spend their earnings at the pub, whereas women spend money they earn on their families, particularly on sending their children to school to get the education that can lift them out of the perpetual grind of poverty.
There are now hundreds of microfinance agencies that provide capital to MFIs around the world, including impoverished areas of the United States. A donor can provide capital through three types of organizations. The big institutions such as Grameen, Accion International and Opportunity International/Women’s Opportunity Fund oversee a vast global network of MFIs and lending banks. Specialty donor-advised funds, which direct contributions to MFIs, include the Philanthropic Collaborative of Rockefeller Philanthropy Advisors (RPA), the Tides Foundation, the National Philanthropic Trust and the Charities Aid Federation. A third approach is to start one’s own program; the challenges are many, but Melissa Berman, president and CEO of RPA, which also helps donors develop and manage their giving programs, has worked with brave souls who feel a sort of calling to power the wheels of free enterprise with their own personal business savvy in places such as Afghanistan.
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