Teach a Man to Fish: Microfinance Loans

microfinance

One of the best books I’ve read about hunger and poverty is Ronald J. Sider’s Rich Christians in an Age of Hunger. Sider takes apart the myriad roots of poverty and hunger and analyzes the solutions that various individuals, charities, and government programs employ to try and combat poverty and hunger. Sider’s top method for poverty alleviation is microfinance loans. But what is microfinance?

It’s kind of like the old saying – give a man a fish and he eats for a day; teach a man to fish and he eats for a lifetime. Charitable handouts, welfare programs, and emergency relief measures fill gaps to help people get back on their feet when they have that opportunity. For example, if a family’s chief breadwinner loses his or her job, welfare programs might help the family make ends meet until a new job is secured. If a natural disaster wipes out a family’s possessions, emergency relief programs meet their needs until the crisis is over. But for situations of chronic poverty and hunger, a short-term solution just won’t cut it.

The key to battling chronic poverty is to create jobs and economic opportunities. This is the idea behind microfinance loans. Developing world citizens who need small loans cannot get them from banks. They usually don’t have any collateral, and there may not even be banks near them. So microfinance organizations connect prospective borrowers and donors. This allows average people to invest in the lives of others, and borrowers use the little loans to do things like start or expand businesses, or buy livestock. As the borrowers succeed, they repay the loans (which have really low if any interest). It’s not a handout, it’s an opportunity for long-term success. With the loan repaid, the donor or the organization can make another loan.

I haven’t personally invested in microfinance, but I’m curious about it and have done some digging online. Charity Navigator rates microfinance organizations, so with just a little research you can find a reputable place to donate. Once you select your organization, you pick your loan recipient. You can find projects with an environmental component, look for female-owned businesses, or pick a project in a part of the world you’re drawn to. Most of the projects I saw in my brief look around were about $1000, and they broke that up to involve donors of modest amounts, like $25.

I love the idea of making an investment in an individual. It’s kind of like an adult version of sponsoring a child through Compassion International. You can pray for your people and their business, and you get to see updates of how your little investment is paying dividends in the life of an individual or family.

Stopgap programs serve an important function, but for long-term community change, the jobs and economic opportunities created by access to capital can feed a person or family for a lifetime.

Have you ever made a microfinance loan? What organization did you donate through? What was your experience like? Share in the comments!

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