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Business columns: Small loans that make a big impact
There's money to be made from "lending tiny sums to people who live on a few dollars a day," said Daniel Gross in <em>Slate.com.</em>
 

Daniel Gross
Slate.com

What the world needs now is more subprime lending, said Daniel Gross. That suggestion will horrify most Americans, but far from Wall Street, “billions of people are starving for credit.” And there’s money to be made from “lending tiny sums to people who live on a few dollars a day.” That notion was proved by Nobel Peace Prize winner Muhammad Yunus, who pioneered “microfinance” in Bangladesh in the 1980s. He showed that loans of $25 or less to “budding entrepreneurs, usually women” were a remarkably effective way to relieve poverty in the developing world. The cow or sewing machine that the loan makes possible doesn’t just improve the life of the borrower, it makes her whole village more prosperous. And the repayment rate of about 98 percent is one that most credit card companies would envy. To go large scale, though, “microcredit needs to move out of the realm of the social worker and into the halls of finance.” It’s starting to happen. Britain’s Standard Chartered Bank has pledged to put $500 million into microfinance, and other banks are edging into the market. For “those at the bottom of the pyramid,” it can’t happen soon enough.

 

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