This is a day when bloggers around the world unite-and-write about poverty in order to raise awareness. Personally, I can't say that I an expert in poverty. I've been lucky enough to have never really experienced true poverty. That said, I'll give my two cents anyhow as part of the effort to raise awareness and knowing that two cents given from multiple sources can add up to worthwhile amounts. Which leads us to my first topic: Microfinancing.
I think that Microfinance can be best explained using infomercialism.
Infomercial for Microfinancer-2000-X already in progress :
Mike: "Many of you are saying to yourselves: Hey Mike, I've heard about Microfinancing, but I'm not really sure what it is. Micofinancing is basically the act of lending small amounts of money to the very poor, by institutions other than big banks."
Member of paid audience: "OK Mike, so that's what Microfinancing is, but why is it an important issue in today's turbulent times?"
Me: "Microfinancing is an important issue because it addresses one of the worlds pressing issues: Extreme Poverty. It does this by allowing money to reach entrepreneurs living in poor countries. Microcredits allow the entrepreneurs to start businesses, provide for their families and stimulate the local economy. They can place larger orders and take on larger projects and hire employees. Most importantly they avoid crippling interest rates that can often reach 100% per month in some countries."
Typical sales-person/host who asks basic naive questions: "That's all fair and well Mike, but why don't these entrepreneurs just borrow from banks?"
Me: "That's a fair and non-basic question Rob Lowe. The reason that the people who receive microfinancing cannot borrow from traditional banks is because they often cannot offer anything as collateral (such as a house, a building or title to land) which banks require when lending money. Even if they do have collateral it’s rarely enough to secure a loan large enough to be profitable for a typical bank."
Member of a visible minority: "If banks don't lend out the money then who does?".
Me: "Microfinancors vary from smaller private banks, non-profit groups and even people like you or me. The best part is that loans can come from multiple sources, so the risk is reduced!"
Grandmother: "Microfiancing seems complicated and I probably don't qualify... Not with my medical history."
Mike: "Not true, Microfinancing is easy to do and only takes a few minutes. There are no medical questions and best of all: The premiums never go up!"
Token blond, overly enthusiastic, soccer-mom type lady: "Wow, that sounds great. How can I Microfinance an third world entrepreneur right now?"
Mike: "You help end Extreme Poverty today by going to a site such as http://www.kiva.org/ and lending as little as one easy payment of $100?"
Rob Lowe: "Come on Mike! You can do better than that."
Mike: "All right Rob, how about this. For a limited time you can: Help end extreme poverty, reduce 3rd world dependence on foreign aid and for today only, as part of a special offer, you can also experience a sense of purpose! All for one easy payment of only $25!"
Rob Lowe: "Amazing Mike! Sign me up for Microfinancing today!".
Man that you never see: "Act Now! Dial toll-free http://www.kiva.org/ right now to fight Extreme Poverty. Usually around 90-100% money back guarantee. Shipping and handling charges do not apply. "
So that is microfinancing in a nutshell. Now that I am done promoting debt, it's time to bash it while trying not to sound like a complete hypocrite:
First off, debt is not a bad thing. In fact debt is an essential concept in today’s shaky economy (perhaps not tomorrows). The problem with debt is that it is often associated with interest, often high interest. Interest is a tool that for years has helped the rich get richer and the poor get poorer. It’s based on simple math but since people don’t care much for math, they usually get into financial trouble due to interest associated to debt.
If your financial life was a hike along a mountain, debt would be the grass just at the edge of the path that is often safe to step on in order to speed up your pace. However, once in a while, it gives out and sends you on a trip down a slippery slope that you may end up on for the rest of your hike (never reaching the top of the mountain). In this imagery, the Bank would be the hiker ahead of you that recommends that you walk on the grass in order to reach the top faster. They also insist on hold onto your backpack for you.
All that to say that I hate owing or being owed money so I pay things back as soon as I can and avoid borrowing completely. Emotionally I prefer to give something away then to lend it. But that’s just me.
I'll end this post by mentioning the current global economic crisis. There done. I think we hear enough about it from our propaganda machines. As much as I like the topic I’ll stay clear of it today just cause I just had a long talk about it last night with a co-worker and I don’t really want to go down that rabbit hole again. I want to keep this short and just say this:
1) A lot of people and organizations are making money and (more importantly) gaining power over the "Crisis".
2) Usually if you want to find out who is responsible for a problem you simple have to look towards who is profiting from it.
3) The Federal Reserve should be allowed operate in the way it does.
Thats all for my blog today. Thanks for reading and stay tuned to find out about a really cool tree I StumbledUpon in downtown Florianopolis last weekend.
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