

In developing economies, equity beats microfinance - cwan
http://finance.fortune.cnn.com/2011/04/20/in-developing-economies-equity-beats-microfinance/

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Stormbringer
Interesting article, but isn't there an implicit assumption here? That it is
better to generate employment than (micro) entrepreneurs? That it is better to
work for someone else than to work for yourself?

I'd challenge that assumption, and challenge it hard.

After all, it wasn't a nation of "good corporate employees who don't rock the
boat" that built an Empire on which the sun never set... it was a nation of
shopkeepers :D

Moreover the amount of funds required to give someone full time western style
employment are surely much larger than to give some rural individual the funds
to lift themselves out of a murderous loan-shark system and above the poverty
line.

So in terms of ROI (where the return is net benefit to society per $ invested)
micro finance has to be the winner hands down.

The thing is that it is enormously much easier to throw $1 million at some
small company and feel smug that you've done your bit for peace love and mung
beans. It is enormously much more difficult to go out into the bush (or
wherever) and find a rural village and bootstrap them off loanshark debt by
lending a selected few individuals $10 each and then carefully tracking their
repayments.

$1000 carefully nurtured will bring prosperity to an entire village. A $1
million dollar loan to some small company is going to benefit the sports car
and golf course industries more than it will benefit their own country. Even
if some of the money went to employment instead of the owner's lifestyle, is
it really 1000x more beneficial to the country than the $1000 that saves a
village? I think not.

