If you give a man a fish you feed him for a day, but if teach a man to fish, you feed him for a lifetime. But what if a man knows how to fish but can’t afford a fishing pole? Or what if he knows how to sew but can’t afford a sewing machine? Can farm, but lacks a plow?
The recognition that some people have skills to make themselves self-sufficient but lack capital to buy the tools they need to support themselves was one of the motivations for the microlending movement.
In the early 1980s Muhammad Yunus, a Bangladeshi economist and social entrepreneur, began a project in which he used his own money to deliver small loans at low-interest rates to the rural poor. He later founded Grameen Bank to extend microlending to other communities in Bangladesh. In 2006 Yunus and Grameen Bank won the Nobel Peace Prize “for their efforts to create economic and social development from below.”
For free market advocates like me, this sounded like an ideal poverty-fighting initiative. Indeed, for about ten years I’ve been a funder of Kiva, a non-profit microlending network. I’ve always liked the idea that I was able to play the role of a small-scale venture capitalist, funding entrepreneurs in developing countries.
But in my zeal to help I never bothered to ask, “Does it work? Does microlending really help people escape poverty?”