OCR Text |
Show HINCKLEY JOURNAL OF POLITICS SPRING 2001 acquired new hens and a rooster. Eventually, she sustained a modest chicken and egg business. Today, with the help of microcredit, she has a large chicken farm, a healthy baby dressed in quality clothing, and the money to send her children to school (Frantz 2000). WHERE DOES MICROFINANCING FIT IN THE INTERNATIONAL DEVELOPMENT DEBATE? At a time when the United States and other nations consistently cut foreign aid budgets, it is necessary to approach international aid and development from the most basic levels. As globalization occurs, it is evident that national and regional political, social, and economic issues are becoming increasingly intertwined. Clear examples include the financial crisis in Asia, the instability in Russia, the chaos in the Balkans, and the challenges of peace in the Middle East. Even the recent US presidential election "crisis" implicated global economics. Indeed, "the so-called third world can no longer be perceived as a distant reality beset with problems that have little or no bearing on our comfortable lives here in the first world...the dangers of underdevelopment a continent away are similarly knocking on our door" (Hoy 1998). Issues of environmental degradation, infectious disease, civil war, and political uncertainty clearly no longer stop at a longitudinal line or riverbank (Hoy 1998). The United States government does not balk at explaining why it gives aid: to protect its territorial and political security. Historically, U.S. aid was only bestowed upon allies for security purposes, often supporting the installation of abusive right-wing governments to decrease the threat of communism. Aid has been given to stimulate foreign markets for potential American business investments. In theory, aid goes towards helping people in need. In fact, nearly all donor countries give aid for the purpose of getting something (usually political or economic benefits) in return (Hoy 1998). Aid is crucial to international development as it resolves the issues of instability in developing countries. The most universal cause of this instability is poverty. Poverty facilitates conflict as people fight over water, food, clothing, and shelter. Alleviating this global ill is the primary objective of microfi-nance institutions, which have grown out of the inability of many governments to look beyond their own political agendas. Microcredit practitioners are confident they can help many people because microcredit is a simple solution to the very complex problem of development. Microcredit follows the basic principles of the free-market, giving those with innovative ideas the money to start working. When the poorest people in the world use this capital, they are often able to pull themselves out of poverty and, in the process, allow their children to escape the cyclical nature of poverty. This makes microcredit a preferred method of aid, because government involvement is minimal. It is also a relatively inexpensive method of distributing aid. In 1997, the Microcredit Summit (made up of the world's most successful microfinancing organizations) was held in Washington, D.C. At the meeting, several international microfinance institutions pledged to reach 100 million of the world's poorest families by 2005 (Adams et al. 2000) and give them the opportunity to rise out of poverty. Microcredit is becoming an attractive alternative to more traditional types of aid. Originally, aid was viewed as a handout to poor nations. The money was given to governments, which sometimes squandered or siphoned off money. Today, with microfinance, governments become an unnecessary and unwanted middleman. The United States Agency for International Development (USAID) has begun its own programs to further microcredit. The Microenterprise Initiative dedicated $400 million from 1994 to 1996, supporting over 150 institutions in 40 countries. Microcredit has presented itself as an answer to many nations' aid woes, creating successful businesses for the world's poor, improving economic output of underdeveloped nations, and establishing strong institutions that are not only sustainable, but in some cases profitable (Schneider, 1997). WHY MICROCREDIT WORKS There are three key reasons why microcredit is so reputable. First, microenterprise gives people a sense of empowerment. Second, microcredit is capable of customizing itself to those it serves and alleviating poverty. Finally, microfinancing is making a unique form of aid sustainable and is viewed more favorably than many less economical alternatives. EMPOWERMENT One unique aspect of microcredit is that it only works if the people choose to use it. Rather than receiving a one-time handout, people are given the opportunity to help themselves-and their community-to a better life. Empowerment comes as individuals use microcredit to lift themselves and their families out of poverty. Credit creates economic and social power, since credit affords the privilege of receiving resources. Because financial institutions decide on the credit-worthiness of an individual, they are an important social tool. Since they require collateral, paperwork, and often complicated legal procedures, banks have traditionally established what some call "a financial apartheid" (Yunus 1998). For poor people, a simplified process for receiving financial benefits decreases the level of powerlessness they experience, and enables them to begin the process of escaping poverty. CUSTOMIZING MICROCREDIT ALONG CLASS AND CULTURAL LINES Microfinancing also helps empower people by giving them social power. However, it can only do so if people want and understand social power. By adjusting itself to the people it serves, microcredit addresses the social issues of the country in which it is used. Customization occurs because microcredit is 23 |