Microlending

What is microlending?

You've probably heard the saying "Give someone a carrot and you feed them for a day. Give them some carrot seed and a spade and you feed them for a lifetime." Er, or something like that. And you've probably also heard "you have to have money to make money."

Microlending is the combination and extension of these two aphorisms. The poorest of the poor are given small loans (typically under $100) which allows them to buy the tools they need to support themselves, typically something like a sewing machine, or a pottery wheel, or farming tools. It is not charity in the usual sense; they do have to pay the money back, with a small amount of interest. Traditional banks wouldn't want to touch these people: they have no property, no collateral, no hope. Or so it would seem. Microborrowers actually pay back their loans at about the same rate as we wealthy Westerners typically do, even though they typically have no material collateral.

Microlending has been one of the biggest success stories in the struggle against poverty, especially for women. As far as value-for-effort, I would say microlending and Fair Trade are the two most successful anti-poverty programs since decolonization. Both are spreading at rapid speed, and it is now becoming possible for Western individuals to make more of a personal contribution in these kinds of programs. But with so many new programs, how are they different? Which make best use of their money?

Slate has a helpful semi-systematic review of many microlending programs, kind of like a Consumer Reports of charitable lenders, giving detailed comments about the best and worst aspects of individual programs. Very useful to the discerning donor, and the recipients as well.