Microcredit: a brighter future?

I think the greatest problem out there is poverty. It is unbearable to think that 1 out of 8 people in the world are suffering and dying from hunger continuously while others have conditions that these people would not even be able to envision.

The cause of this problem is the greed of some people who cannot seem to be satisfied with what they have and are still seeking to maximize their profits on the lives of others. This has been happening for centuries at this point and it has taken different faces from colonization to corporations. It goes without saying that this is messed up. Surely there has been a rising awareness about the enormous problem that poverty is and many organizations, both profit and nonprofit, have attempted to tackle this problem in various ways.

Two main ways have been taken in the past. The first consists in donating to charity and the second involves offering microcredit and educative programmes. I believe the difference in these two approaches is what shows a shift in the approach of organizations and individuals when attempting to alleviate poverty. It is the 21st century billionaire version of the old adage, “give a man a fish and he eats for a day, teach him to fish and he eats for a lifetime.”

Clearly, I am not against charity entirely. My point is that society would benefit more if the wealthy channeled their creative energies and talents toward building job-creating business rather than doling out cash. I believe that by creating a business focused in managing a social issue is a great way for people in that business to pour their resources and time into acquiring relevant information and gaining a deeper understand of the various intricacies that a determined social problem, like hunger in this case, presents.

However, this is not enough. Many companies seem to be doing this at the beginning of their lives in order to attract customers and once their image is positive and consistent, they leverage it and change the focus from the social issue to profit. This defeats the whole purpose. I can definitely see how more profit could mean greater impact for the company in addressing the social issue they have in hand, but where is the line drawn? What is the ideal amount that a company should pocket in the form of profit and what is the amount they should use to address the social issue in hand? I think this is a tricky question.

Ideally, I believe that the strategy used by the Grameen Bank has done a pretty impressive job when it comes to approaching the issue of hunger and poverty while paying close attention to the effect it has in the every day lives of the borrowers.  If a company starts of only catering to a small number of people and making sure that the education given to the borrowers is very individualized and location relevant, it will be able to provide long-term benefits to the people. This is a better approach than simply giving away loans without a program of specialized education because otherwise borrowers may just use the loans for purposes that do not necessarily improve their lives in the long term. Afterward, the company could slowly increase the number of clients. I say slowly because this specialized education should stay as part of the company’s mission so to achieve the desired positive long-term impact. In what respects the profit that the company seeks to keep, it is needed to create a culture within the company in which  people realize that the materialism that many western societies are used to is unnecessary and in which they are satisfied with living a more austere yet fulfilling life.



4 thoughts on “Microcredit: a brighter future?

  1. Nice post Dan in referencing our past discussion of microcredit. Id like to comment on your notion that companies must decide how much of their profit to keep and how much to give out to social issues. I believe that this perceived dichotomy reinforces the contention between stakeholder and shareholder theorists and prevent progress and change. Why cant profit be created through alleviating a issue? The incentives need to be realigned and the system amended around balancing both profit and social welfare simultaneously.

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  2. I agree with you – lending out money in the way that Grameen Bank did in order to help people learn their own trade and profit from it is a great idea! However, I think (and I could be wrong) that there are a lot of start-up companies and small businesses that often close after 5 or so years because they aren’t able to be as competitive (in pricing) as the larger companies so I wonder how well microcredits would work in the U.S.?


  3. Brady, than you for your post. I agree with you it is very frustrating to see that profit and social welfare is not accounted together in the system we have in place due to the incentives we place. I think it we is a problem that is born out of our capitalistic society. Executives and directors are simply not willing to minimize the profit that they earn per individual that works for them. Obviously if they minimized the surplus that is produced per worker and stopped exploiting laborers, then they could use this money to incentivize social welfare as well while still making some profit. Now, reading back, I see that it may sound a little Marxist, but I am not supporting communism as the solution.


  4. @Mona, you make a very good point, microcredit has worked in a worse manner in the U.S than in in other places. As far as I am concerned, I have seen that microcredit have been working better in developing countries than in developed countries. I believe this may be a culturally relevant situation, in which one culture’s people are more likely to use microcredit into projects that will create a better situation for them in the long run, while in the other culture they may be using it as a part time income and an opportunity to work less and spend more time with their children.


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