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RE: Microfinance: Challenges and Possible Solutions

in #crowdfunding7 years ago

Microfinance is complicated. It has under the right circumstances helped people but under other circumstances it has become the equivalent to a loan shark. Ideally, when an organization gives a loan it asks for a business plan. The business plan -asks a lot of important questions like, how are you going to repay the loan. What is your profit margin? What is you budget, what is you contingency plans? Who do you have advising you? (Board of directors, others who have done this in the past.) In some cases this has been successfully done via a group of neighboring women, and there is social responsibility for repaying all the loans. The group of 12 women are better able to advise on needs and profit potential than a foreigner. The real benefit from the program comes not from the money but from the business plan and related questions. (I am not saying one needs a formal business plan to be successful, I am saying that not having good answers to the questions a typical business plan asks could be detrimental.) While many loan programs have helped, another alternative is savings programs, where people save a little money each week then loan it out to a member of the group. These have the advantage of not being dependent on outside banks. One successful program like this also had a emergency/compassion fund where each member gave in an amount and when a tragedy happened. -A family death- the group could give a set amount to that family member. (for example 20% of the pooled money, or X amount for this type of event.) This more or less was the beginning of a an insurance. Now if a crypto currency program incorporated these "business planning" aspects, and also incorporated the "joint social responsibility" it is much more likely to have a positive impact. -Note I have an MBA and two years of second & third world travel experience.