I am faced with a never ending conversation promoting micro lending.
I have been listening to this conversation since the early 1980s.
I want to be on record as saying that it is bull shit.
I have looked at micro-lending programs in many parts of the Third World. I started looking long after I heard the idea promoted.
The idea always looked glamorous to people who don't understand business. It seems a simple way to solve Third World backwardness. It seems like something anyone can do.
Let us start with the fact that: I have never met, anyone, anywhere who had good business skills and could not raise money from their friends and family. Regardless of how little money their friends or family had.
Even in the most desperate circumstances, a person can raise money if he or she is trusted as a good business person. They can sell something of their own to raise money, they can do work for others to save money. It is simply a preposterous fallacy that people with business skill have trouble raising money.
On top of this fundamental preposterous notion, micro-lending systems inherently fail because when honestly examined their borrowers never repay the money. The borrowers simply borrow new money to repay old loans.
Everywhere that I have looked from Guatemala to India, the interest-rate has been high. We are talking 30 to 70% in real annual interest terms.
Put it all together and you have another Lefty fantasy that is generally harmful to the poor.
I have been listening to this conversation since the early 1980s.
I want to be on record as saying that it is bull shit.
The idea always looked glamorous to people who don't understand business. It seems a simple way to solve Third World backwardness. It seems like something anyone can do.
Let us start with the fact that: I have never met, anyone, anywhere who had good business skills and could not raise money from their friends and family. Regardless of how little money their friends or family had.
Even in the most desperate circumstances, a person can raise money if he or she is trusted as a good business person. They can sell something of their own to raise money, they can do work for others to save money. It is simply a preposterous fallacy that people with business skill have trouble raising money.
On top of this fundamental preposterous notion, micro-lending systems inherently fail because when honestly examined their borrowers never repay the money. The borrowers simply borrow new money to repay old loans.
Everywhere that I have looked from Guatemala to India, the interest-rate has been high. We are talking 30 to 70% in real annual interest terms.
Put it all together and you have another Lefty fantasy that is generally harmful to the poor.
