Microlending
Connie Bruck has written an awfully interesting piece, "Millions for Millions," in the current New Yorker about the difference between microcredit and microfinance, both of which lend money to the poor. As you know, Muhammad Yunus, the Bagladeshi founder of the Grameen Bank, a microcredit institution, will be awarded the Nobel Peace Prize in December, after several years on the speculative shortlist. Mr Yunus, and other advocates of microcredit, would like to eliminate poverty. Pierre Omidyar, the inventor of eBay, is a major force behind microfinance, which seeks to make banking available to hundreds of millions of unaffluent strivers. "Microcredit" signifies not-for-profit operation. Microfinance is frankly capitalist. According to Ms Bruck, the divide between the camps is becoming acrimonious. Microcreditors deplore the insertion of a profit motive, which rules out lending to the extremely poor. Microfinanciers complain that philanthropy distorts the market, keeping unsuccessful programs alive. Just to make things interesting, there's no evidence that microlending of any kind has altered the world's aggregate poverty - even though microlending is known to work in individual cases, and quite well at that. It follows that there is no evidence that one kind of microlending is more effective than the other. Enter the Bill and Melinda Gates Foundation (might it not have been better to title the piece, "Billions for Millions"?), and you've got some real excitement going. All that virtuous moolah!
Making an objective choice between microcredit and microfinance seems to me to be almost an impossibility, because the two varieties of microlending have been generated by very different mindsets. Mr Yunus believes in highly constructive charity; Mr Omidyar believes in the free market, "creative destruction" and all. Be sure to read the piece; at a minimum, it'll be good exercise for your brain.
Ms Bruck does not mention any microlending operations within the United States. You'd think there wasn't a need.
