http://en.wikipedia.org/wiki/Microcredit
Microcredit is the extension of very small loans (microloans) to the unemployed, to poor entrepreneurs and to others living in poverty who are not considered bankable. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit. Microcredit is a part of microfinance, which is the provision of a wider range of financial services to the very poor.
Microcredit is a financial innovation which originated in Bangladesh where it has successfully enabled extremely impoverished people to engage in self-employment projects that allow them to generate an income and, in many cases, begin to build wealth and exit poverty. Due to the success of microcredit, many in the traditional banking industry have begun to realize that these microcredit borrowers should more correctly be categorized as pre-bankable; thus, microcredit is increasingly gaining credibility in the mainstream finance industry and many traditional large finance organizations are contemplating microcredit projects as a source of future growth. Although almost everyone in larger development organizations discounted the likelihood of success of microcredit when it was begun in its modern incarnation as pilot projects with ACCION and Muhammad Yunus in the mid-1970s, the United Nations declared 2005 the International Year of Microcredit.
I saw an interview with Yunus, he said that to overcome poverty, people don't need money, they need a sense of ability. If they think they can't beat poverty, the best welfare system in the world will never help them(and most ******)
But if you give them a sense that they can overcome their poverty...and give them the means(through the micro-loans) many can overcome poverty. The wiki doesn't give too much info on it, and im not an economist, but it's fascinating.
It could bridge the gap between economically leftwing and rightwing forces, since it essentially is both collectivist and capatitalist.
Most people who tend to be libertarians by default have a low opinion of poverty because of socialists extreme insistence to the welfare system.
This response to the socialist model would probably be micro-loans.
We have lots of intellegent people posting on these forums, much smarter then i am.
So i would like to see your opinions on this.
Ron Paul is a libertarian and pro-gun and everything, but he was known to do alot of charity work.
Micro-loans: A capatlist model to fight poverty.
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Bill Glasheen
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Adam
I've heard a bit about the microcredit industry. It's a very interesting concept.
We've had other novel loaning paradigms here. There's now a whole industry developed around loaning money to people with very bad credit so they can buy cars, etc. Generally the interest rates are extremely high because the risk for the loaner is so high. If the loaning institution expects to make a profit in a niche where many will pay late or default, then the difference must be made up with higher interest rates. The good news for some (recently divorced or bankrupt, never had credit before, etc.) is that they can use such a loan to develop a good credit history so that they subsequently can become eligible for the higher credit, lower interest rate loans.
In the end for the bank, it's all about making money. My parent company has subsidiaries that build models to predict the revenue so that the interest rates and such can be set. It's a data-driven industry.
The thing with the microcredit industry is that they're entering areas where you have the same percentage of responsible people in a population who could be good risk, but they have no basis upon which to build a credit history via the traditional transaction channels. Theoretically this does seem like an interesting untapped source of revenue. The key to the loaning institutions is for them to figure out who in these disadvantaged populations are good risk, and who are not. Therein lies the data challenge for the loaning institutions, and the opportunity for the deserving disadvantaged.
- Bill
I've heard a bit about the microcredit industry. It's a very interesting concept.
We've had other novel loaning paradigms here. There's now a whole industry developed around loaning money to people with very bad credit so they can buy cars, etc. Generally the interest rates are extremely high because the risk for the loaner is so high. If the loaning institution expects to make a profit in a niche where many will pay late or default, then the difference must be made up with higher interest rates. The good news for some (recently divorced or bankrupt, never had credit before, etc.) is that they can use such a loan to develop a good credit history so that they subsequently can become eligible for the higher credit, lower interest rate loans.
In the end for the bank, it's all about making money. My parent company has subsidiaries that build models to predict the revenue so that the interest rates and such can be set. It's a data-driven industry.
The thing with the microcredit industry is that they're entering areas where you have the same percentage of responsible people in a population who could be good risk, but they have no basis upon which to build a credit history via the traditional transaction channels. Theoretically this does seem like an interesting untapped source of revenue. The key to the loaning institutions is for them to figure out who in these disadvantaged populations are good risk, and who are not. Therein lies the data challenge for the loaning institutions, and the opportunity for the deserving disadvantaged.
- Bill
