Tuesday, October 21, 2008

Commentary on Microcredit

Microcredit has come up smelling like a rose in this credit crisis.

A big contrast: small loans to people with little collateral or assets, but they get payd back 98% of the time. Meanwhile, home loans gave people a lot of money upfront, then many were unable to pay of the loan after then blew the money on other stuff (maybe other bills).

Yes, we need to have more microcredit in this world. A commentary written by Misty Novitch was published in the Atlanta Journal Constitution. It shows the successes of microcredit, and also encourages participating in a letter drive to tell the World Bank to do more with microcredit. That part of the commentary is what we will focus on for our clip.

Although microcredit ranks as one of the leading foreign aid success stories, the World Bank — whose stated mission is reducing poverty — devotes less than 1 percent of its budget to this innovative strategy.

Despite the World Bank’s own research citing microcredit’s effectiveness, it has failed to put its money where its research shows the greatest promise.

Fortunately, congressional champions of microcredit are pushing the World Bank to do better. Letters are circulating in the U.S. House and Senate asking World Bank President Robert Zoellick to:

• Set up a grant facility for MFIs trying to reach the very poor.

• Set up Centers of Excellence at MFIs like Grameen and Jamii Bora for other providers to study and emulate.

• Create a sub-Saharan African apex fund, allowing MFIs working to reach the poorest access to needed funds.

So far, Rep. John Lewis (D-Ga.) has signed on to the letter. Other members of the Georgia delegation should be encouraged to do likewise.

Global leaders are now scrambling to put the world’s economic house in order after greed and speculation brought the system to the brink of disaster.

It’s time for our financial institutions, starting with the World Bank, to start making smarter investments. The poor have demonstrated that the smart money should be riding on them.

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