Micro-lending is gaining in popularity for good reason. This article acknowledges that truth, yet presents the oversights of the micro-lending system, mainly that of the lack of job production. As Surowiecki writes, “Just fourteen per cent of Americans, for instance, are running (or trying to run) their own business. That percentage is much higher in developing countries—in Peru, it’s almost forty per cent. That’s not because Peruvians are more entrepreneurial. It’s because they don’t have other options. What poor countries need most, then, is….more small-to-medium-sized enterprises, the kind that are bigger than a fruit stand but smaller than a Fortune 1000 corporation. In high-income countries, these companies create more than sixty per cent of all jobs, but in the developing world they’re relatively rare, thanks to a lack of institutions able to provide them with the capital they need….Supplying the missing middle will require backers who want to invest in companies rather than just lend to them. There’s been some progress on this front of late; three weeks ago, Google.org, the Soros Economic Development Fund, and the Omidyar Network announced that they are setting up a firm in India that will invest only in small-to-medium businesses.”
As a recent new “lender” who is pretty inspired by the process of micro-lending, I agree with the author that there are real benefits to this process, not to mention the satisfaction of seeing a “donation” be paid back (a fairly strong sign of efficacy, as measures of aid go). Applying this model to appropriately lend to larger small businesses could lead to increased employment and might provide another avenue for economic growth… I wonder if it might not be worth it to explore how those small-to-medium businesses got to where they are, be it from a small individual-owned business that attracted enough support to grow or not, and to focus on that bridge a bit more.
http://www.newyorker.com/talk/financial/2008/03/17/080317ta_talk_surowiecki/?yrail
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