BUSINESS

Microloans can produce micro effects

NANCY MACDONALD March 31 2008
BUSINESS

Microloans can produce micro effects

NANCY MACDONALD March 31 2008

Microloans can produce micro effects

NANCY MACDONALD

Last week, the University of British Columbia awarded an honorary doctorate to the “godfather of microcredit,” Muhammad Yunus, who won the 2006 Nobel Peace Prize. With his help, microfinance—the practice of making tiny loans to poor people in developing countries—has become one of the world’s most popular anti-poverty strategies. Between 2004 and 2006, investment in microcredit more than doubled. And the total volume of loans made has surpassed $25 billion. Thanks to peer-to-peer websites like Kiva.org, anyone can become a microlender.

Locally, Yunus’s peer lending has become the model for student-activist initiatives like Agents of Change, and B.C.’s Vancity credit union, whose decadeold peer lending program grew by 58 per cent in 2007 alone. While in Vancouver, Yunus also met with Aboriginal leaders— representing a segment of Canada’s own population that faces borrowing barriers due to lack of collateral, credit history and full-time employment. “The problem is the same,” he told Shawn Atleo, B.C.’s regional chief of the Assembly of First Nations. “People are left behind.” Perhaps Aboriginals can learn from Bangladesh’s banker to the poor. But the New Yorker magazine recently noted a problem with the model. The vast majority of microbusinesses have a single employee: the owner. And they aren’t looking for new workers. The developing world—like Canada’s reserves, where unemployment rates sometimes top 75 per cent—needs small and medium-sized enterprises, the source of most job creation in the developed economy. Businesses that can generate jobs for others are the best hope of any community trying to take a serious bite out of its poverty rate.

The country’s sawiest First Nations communities, like B.C.’s Osoyoos band, have used lease revenues to guarantee loans that fund a growing number of mid-sized ventures, notably a golf course, resort and winery in the Osoyoos case. These, not one-man veggie stands, generate regular paycheques for large numbers of people. M