An article at TCS Daily highlights Kiva, the website that allows individuals to make microloans to entrepreneurs in the developing world. It points out exactly what appeals to me about the organisation:
Kiva offers a blueprint for development that Friedrich Hayek would have appreciated. First, the focus is squarely on the individual — at both ends of the lending process. Corrupt third-world governments are bypassed altogether, as money flows directly to the people who need it. Moreover, that money originates not from the "coerced charity" of taxation, but from the freely chosen generosity of informed citizens.The article also discusses the criticism that microlending has received: that it reduces the pressure on governments to reform and that there is no evidence that microlending aids development.
Second, the funds distributed by Kiva are not handouts, and therefore do not perpetuate dependency. Money is loaned in support of specific business ventures, with the ultimate goal of promoting financial self-reliance. The necessity of repaying these loans does much to foster personal responsibility, in sharp contrast to the message sent by aid shipments or debt relief. Finally, and perhaps most significantly, these small businesses empower Africans by giving them a direct stake in their societies and economies — a necessary condition for the emergence of a democratic polity.
While I believe that extending credit to the poor actually will help in the quest to bring societies out of dire poverty, I also think that it is not the only measure of success. I don't believe welfare is a good solution to poverty in North America, why should it be a considered acceptable solution in Africa or South America?
I first began lending through Kiva last year, to a woman in Kenya. She has now nearly repaid her loan, which she used to build another room as part of a rental business. The additional income this generates will ensure that she can provide her children with a secondary education. Whether or not the loan will significantly help the Kenyan economy overall, it is helping one woman to better provide for her family. She is teaching her children the same values that my parents taught me: that hard work and education matter. But they can only matter if you have access to opportunity, which is what Kiva helps to provide.
I still believe in charity to help those most in need. But this woman didn't need charity. She needed short-term access to funds to expand her business. Yes, the Kenyan economy is in need of reform to enable small entrepreneurs to access credit through private lending institutions. But clearly some people in the developing world are unwilling to wait patiently until the rules are rewritten so that they have a chance at improving their lot in life.
There is no one solution to the problem of poverty. War, corruption, disease, a lack of access to basic education, the need for political reform and a host of other factors all are all part of a cycle that keep much of the world in dire poverty. The fact that microlending does not immediately solve all of these problems (although citizens not concerned with the immediate issue of making sure their children are fed are more likely to pressure their governments to reform) does not mean it does not have a role to play. We need to stop looking for a quick fix. It isn't coming.