- Muhammad Yunus
After almost a month of conducting research, and interviewing the clients and entities of micro finance, I've come to understand that microcredit lending is COMPLICATED. It's effective in the sense that it helps mitigate the negative effects of poverty, but in the long run, it's not the solution to poverty, and it doesn't make a poor country any richer.
On the one hand, it allows people to improve their lifestyles; it gives them the means to buy a cow which will allow them to produce and sell more milk, it gives them the means to afford a safer roof for their family, and an education for their kids, but it doesn´t allow a business to grow to the extent where it generates macro growth for an economy or for the individual himself.
loan. This is generally because investing in people with low income is risky for the companies giving the loans, and also because the cost of administrating several small loans is much higher than that of administrating fewer larger loans. Plus, for the most part, the people that receive the loans are in such desperate access to capital that they have no other option but to accept high interest rates.
It would be needless to say that microcredit loans have no impact on the poor, because they do; they E M P O W E R entrepreneurship, they I M P R O V E a struggling families lifestyle, and they open doors to new O P P O R T U N I T I E S. But it is very few people who go from owning a fruit stand to owning a large grocery store, and although the current structure of microcredit lending is incapable of eradicating poverty by itself, it's definitely a start, and a system that can and should be improved.