This books subtitle, "Microcredit, Barefoot Banking, and the
Business Solution for Ending Poverty", really tells you the
scope of what the authors intend for their book: no less than
ENDING POVERTY. While I think microcredit is a powerful
innovation, that is perhaps a bit of an overreach.
The better part of the book is written from the philanthropist's
perspective which, I must admit, I found a little offputting.
Yes, I know there are people out there working hard to figure
out the best way to donate the vast sums of money they've accumulated
over their lives. I, however, have yet to accumulate the
aforementioned vast sums so I am still working that problem.
When A Billion Bootstraps delves into the details of how
microcredit really functions on the other hand, it shines.
Smith & Thurman make an excellent argument that charity
actually holds back development. They point to the example of a
famine caused by crop losses in Africa. Free food gets donated
and routed to famine stricken areas. Consumers prioritize the
free food to the detriment of local producers who are already
reeling from crop losses. Instead of getting the boon of
temporary high prices for their crops that could lead to
reinvestment in agriculture, charity drives the price of their
goods to effectively zero. Then, when the next agricultural
hardship inevitably comes along, it leads to a worse famine because there
are fewer farmer due to so many being driven out of business!
Of course, since so much of the microcredit industry is
dependent on donors, one wonders if they are kicking the legs
out from under their own argument. In terms of ROI the authors
make a much stronger case: because such a high percentage of
loans are paid back, the money can be reloaned multiple times
giving many families the opportunity to advance with the same
capital. It's the old adage of give a man a fish, feed him
for a day; teach a man to fish, feed him for a lifetime writ
large to some extent.
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