Friday, November 26, 2010

How Microlending Could Revolutionize How We Help The Poor

One important way to help those in need, especially those unable to earn for themselves, is through generous giving. Another way we can offer much needed help, especially to those able and eager to work, is by making generous loans available from our savings.

Through a variety of new microlending programs, it is now possible to assist enterprising individuals both at home and abroad while still having those investments available for our own needs in later years. Meanwhile, our money is helping others in ways that offers them dignity and opportunity rather than simply charity.

This should be celebrated as an astounding option, one that deserves to become the retirement plan of choice for all justice-minded people.

Far too many of us, for far too long, have been anxiously banking on our stock portfolios for our financial futures. By speculating in a largely consumer-driven financial system we have become dependent on the fortunes of Wall Street for our security. Even “socially responsible investing” (avoiding alcohol, tobacco and/or military related enterprises) still largely supports luxury and convenience related products and services that tend to benefit the well-to-do far more than those who lack the basic means of supporting themselves.

What if our focus shifted from investments that are merely “socially responsible” to those that offer a "hand up" to those who truly need it?

But wouldn't that be a risky strategy?

Surprisingly, the default rate on microloans has been extremely low, based on the experience of organizations like MEDA (Mennonite Economic Envelopment Association), Oikocredit, the Calvert Foundation and other microlenders. MEDA, for example, often makes loans to partner groups of small scale entraprenuers committed to seeing to it that no one defaults as a condition for everyone remaining eligible for future loans. This kind of accountability, along with the determination of these borrowers to succeed in order to survive, adds to MEDA’s confidence that such investments are as safe, if not safer, than those in the stock market.

But shouldn’t our retirement savings grow for us rather than providing a mere 1-3% rate of interest?

In a capitalist system we always face the risk of future inflation reducing the purchasing power of our monetary savings. But in light of Christ's teaching on not storing up anything for tomorrow, period, is it too much to expect that we should be content with modest interest rates--primarily to cover the costs of administering our retirement funds?

Since borrowing in Bible times was primarily done by people who were destitute because of famine or other disasters (rather than for capital investment in land or other means of production) any form of usury was frowned upon. In another tradition, Mahatma Ghandi condemned “wealth without work” as one of his “seven social sins.” How can followers of Jesus justify making easy profits by simply placing our bets on a gain-driven economic system, even if to “make our money work for us,’ or to “keep up with inflation”?

In our personal experience, when the economy took a nose-dive in 2008, the savings our employers had invested for us in mutual funds lost a ton of value. But what we had invested in IRA’s designated for microlending remained secure. Besides, we had already enjoyed the benefit of reducing our federal income tax liability through those investments. For us, that seemed good enough.

If many of us were to transfer the bulk of our investments into microfinancing, we could have an immediately positive and dramatic impact on thousands of people’s lives. And if all devout believers worldwide were to do so, plus give generously from their store of wealth, extreme poverty could be virtually eliminated.
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