What's next? Micro-health care, micro-food?
Today, Muhammad Yunus was named the winner of the Nobel Peace Prize for his work with microcredit aka the Grameen Bank. It's ironic for me because it was just yesterday that I was talking to a co-worker about this micro-revolution that has taken over the "do-gooder" world. She had just talked to a official from Accion International (Different from Accion Emprendedora) and had learned some of the criticisms about Yunus's model of microfinance.
Read the NY Times article, and you'll see that his model sounds just perfect. 99% repayment rate and 97% of loans to women! When I was a kid I learned that if something sounds too good to be true, it usually isn't. Now that analysis isn't based on hard facts, but how can the poorest of poor be able to pay back 99% of their loans without some other forces being involved?
So one of the things that turns out is that Grameen Bank relies on many government grants to stay afloat. And this whole women's empowerment thing? It might not be as true as it sounds either. Read this article. I had never really thought about the fact that just because you lend to a woman and make her pay it back doesn't mean she's the one that uses the money.
And is it really ideal to have every poor person in the world start their own business? Obviously entrepreneurs can't be risk-averse, that's what it means to be an entrepreneur. But if you can't put food on the table, are you really going to use the free, no-collateral $200 loan for starting your basket business or for feeding your children? The problem is that none of this can really be proven with hard facts. There's a lot of hypothetical situations, so it's hard to ever have a for-sure answer.
Maybe this whole micro thing is so big because it sounds really cool. I certainly thought so and got sucked into it. Micro-finance, micro-leasing, micro-entrepreneur, blah blah blah. What the hell does that all mean, and what makes something micro? Perhaps when we hear that prefix all of a sudden our minds are trained to think we are doing good for the world.
Here in Chile we call the entrepreneurs we work with microentrepreneurs, but I don't know if I really understand why. Sure they are micro compared to big entrepreneurs, but the real goal of Accion Emprenedora is that each microentrepreneur be able to hire a new employee. Well, that means that what we really want is for micro-entrepreneurs to become macro-entrepreneurs. I think that makes sense. Not everyone needs to be an entrepreneur, some people just need a decent-paying job. So what's our goal as Accion Emprendedora, make more micro-entrepreneurs or strengthen the existing ones so that they can have more employees and become more competitive?
One important lesson from David Bornstein's book on social entrepreneurship is that the reason social entrepreneurs are so successful is because they work within the communities they know best and never give up the hope and effort to change them. Note that it's two things, not just the never giving up, "entrepreneurial spirit" part but also the "own community" part. Most successful social entrepeneurs grew up or lived much of their lives among the situation they are trying to resolve, such as rural electrification in Brazil or education in India.
It doesn't mean Muhammad Yunus doesn't deserve the Nobel or that his work is pointless. Perhaps it's just that micro-credit was only effective for the community he came from, rural Bangladesh, and perhaps it can't work everywhere in the world.
One of my favorite messages from Jeffery Sachs' book, The End of Poverty, is that development works like practicing medicine (clinical economics). You have to diagnose each case separately. My sore throat and someone else's sore throat don't necessarily come from the same virus, so you can't just give us all the same remedy. Is micro-credit the answer that will save the world? Now, I don't think so.
If there's anything I' ve learned through this past year is that the more you do and the more you study about this whole development "saving the world" thing, the less you know. Those who think they have the answer, are usually really, really wrong. That's because there is no right answer.
My idea: let's keep empowering the people that know their community best and feel that they have the solutions for their community. Let's train more ethical leaders and have those leaders create even more leaders. The only "large-scale" international development organizations should be firms that go out to look for these people and support them. From what I know, that's what Ashoka and organizations like it does.
But really, as my wise friends in Oaxaca would say, ¿Quién sabe?
Read the NY Times article, and you'll see that his model sounds just perfect. 99% repayment rate and 97% of loans to women! When I was a kid I learned that if something sounds too good to be true, it usually isn't. Now that analysis isn't based on hard facts, but how can the poorest of poor be able to pay back 99% of their loans without some other forces being involved?
So one of the things that turns out is that Grameen Bank relies on many government grants to stay afloat. And this whole women's empowerment thing? It might not be as true as it sounds either. Read this article. I had never really thought about the fact that just because you lend to a woman and make her pay it back doesn't mean she's the one that uses the money.
And is it really ideal to have every poor person in the world start their own business? Obviously entrepreneurs can't be risk-averse, that's what it means to be an entrepreneur. But if you can't put food on the table, are you really going to use the free, no-collateral $200 loan for starting your basket business or for feeding your children? The problem is that none of this can really be proven with hard facts. There's a lot of hypothetical situations, so it's hard to ever have a for-sure answer.
Maybe this whole micro thing is so big because it sounds really cool. I certainly thought so and got sucked into it. Micro-finance, micro-leasing, micro-entrepreneur, blah blah blah. What the hell does that all mean, and what makes something micro? Perhaps when we hear that prefix all of a sudden our minds are trained to think we are doing good for the world.
Here in Chile we call the entrepreneurs we work with microentrepreneurs, but I don't know if I really understand why. Sure they are micro compared to big entrepreneurs, but the real goal of Accion Emprenedora is that each microentrepreneur be able to hire a new employee. Well, that means that what we really want is for micro-entrepreneurs to become macro-entrepreneurs. I think that makes sense. Not everyone needs to be an entrepreneur, some people just need a decent-paying job. So what's our goal as Accion Emprendedora, make more micro-entrepreneurs or strengthen the existing ones so that they can have more employees and become more competitive?
One important lesson from David Bornstein's book on social entrepreneurship is that the reason social entrepreneurs are so successful is because they work within the communities they know best and never give up the hope and effort to change them. Note that it's two things, not just the never giving up, "entrepreneurial spirit" part but also the "own community" part. Most successful social entrepeneurs grew up or lived much of their lives among the situation they are trying to resolve, such as rural electrification in Brazil or education in India.
It doesn't mean Muhammad Yunus doesn't deserve the Nobel or that his work is pointless. Perhaps it's just that micro-credit was only effective for the community he came from, rural Bangladesh, and perhaps it can't work everywhere in the world.
One of my favorite messages from Jeffery Sachs' book, The End of Poverty, is that development works like practicing medicine (clinical economics). You have to diagnose each case separately. My sore throat and someone else's sore throat don't necessarily come from the same virus, so you can't just give us all the same remedy. Is micro-credit the answer that will save the world? Now, I don't think so.
If there's anything I' ve learned through this past year is that the more you do and the more you study about this whole development "saving the world" thing, the less you know. Those who think they have the answer, are usually really, really wrong. That's because there is no right answer.
My idea: let's keep empowering the people that know their community best and feel that they have the solutions for their community. Let's train more ethical leaders and have those leaders create even more leaders. The only "large-scale" international development organizations should be firms that go out to look for these people and support them. From what I know, that's what Ashoka and organizations like it does.
But really, as my wise friends in Oaxaca would say, ¿Quién sabe?
