A Better Way of Giving: Investing

What is micro-financing?

Micro-financing (also known as micro-credit) is a relatively new and innovative approach to investing in small, impoverished areas and allowing them to build up an economy and learn to provide for themselves.

You've heard the proverb "If you give a man a fish, he'll eat for a day. If you teach a man to fish, he'll provide for the rest of his days."

Micro-financing takes that proverb and makes it a reality.

Rather then approach the situation from a "top-down" approach where a donor country will give the government of a TW (Third World) country a large sum of money, micro-lenders decide to work from the ground up (Elahi and Rahman 476). When the organization does this, the country is built up from the main and purest foundation. The people.

Micro-finance organizations work with the people and talk to them about the loan they are to receive. Loans are typically small amounts of money ranging from $25 US dollars to $1,000 US dollars at a maximum. They plan and brainstorm possible ways that their small business will thrive and where possible struggles may occur. The organization provides both social support along with financial support. The money is then given to the new entrepreneur and they use that money to invest in things such as seeds, livestock, tools, or more items that will help their small business grow. The business grows and the entrepreneur starts to make profit all the while building up the economy of the surrounding area.The entrepreneur is then responsible for paying back the loan in a fixed amount of time so that money is not merely given away.

In summary, micro-lenders invest money in individuals so that they can have the small launch pad needed in order to get a small business up and running. The new entrepreneur wisely invests his or her loan, grows his or her business, and pays back the loan with a minute interest (some micro-finance organizations provide interest-free loans). The surrounding areas economy is stimulated and growth is underway. Enough businesses and sound, wise financial decisions and theoretically the entire country will start to build itself up.

When I was little I was blessed to always have my parents there and providing for me. When I was hungry, I had dinner waiting for me at the table. When I was cold, I could go grab a blanket from the closet. When I needed a few more dollars so that I could impress the girl by taking her to a movie, my parents were willing to give me money.

Now that I'm on the other side of the country, I realize that my parents are not there anymore and I need to do some growing up so that I can provide for myself.

I was dependent on them without really realizing it.

The same thing is happening to TW countries in a rather intriguing sense. Some areas in TW countries are so used to receiving a consistent care package or international aid that they are becoming dependent on those resources. Their main source of food comes from the care packages as well as a number of other things.

This is a dangerous situation.

Donor countries send billions of dollars in aid to these countries in hopes that they will use it to build themselves up and start to provide for themselves. However, an aid dependency has risen instead. "Struggling people like [these countries] need aid, but charity does not build confidence, it undermines it" (Barefoot par. 28).

We do not help solve the problem of poverty by creating an entirely new one of dependency.

The most effective way to counteract this problem is to show these people once again that they are completely capable of providing for themselves.

The way micro-loans build up countries is by building up their people. Both morally and financially.

I am not against charity. I believe that it is doing amazing things in our world, however, there are dangers associated with making charity the "remedy" to solve all the world's poverty problem.

You can take part in solving the world's poverty crisis one individual at a time. When you invest in a new small-business entrepreneur in another country, you single handedly take part in building up the country's economy as well as provide a family with a means of paying for food and shelter.

The equation is simple.

You investing in an individual with money = An entrepreneur growing their business = A person providing for his or her family = A country's economy one step closer to being independent.

And all the while you get you money back...
and maybe even earn a little interest.

What are you waiting for?

Qudrat-I Elahi, Khandakar, and M. Lutfor Rahman. "Micro-credit and micro-finance: functional and conceptual differences." Development in Practice 16.5 (2006): 476-483. Academic Search Premier. EBSCO. Web. 28 Feb. 2011.

Barefoot, Jo Ann S. "Lending as miracle medicine. " American Bankers Association. ABA.
Banking Journal 97.2 (2005): 12-14. ABI/INFORM Trade & Industry, ProQuest. Web. 23 Feb. 2011