Pathways Out of Poverty: How Microfinance Can Revolutionize U.S. Foreign Aid to the Developing World.
Date
2006-05
Authors
Molina, Diana
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Abstract
Poverty is a growing problem that has eluded many experts in the development industry for decades. Every progress has brought with it new issues, or unintended consequences. For example, the "Green revolution" that allowed many to maximize crop output has indirectly helped to increase life spans in the developing world, however, the unintended consequences were increased fertility rates, resource depletion, and overpopulation. For over fifty years, the development industry has attempted to respond to the challenge presented by poverty with little, if any, sustained progress. Over the years, many lessons were learned, and aid shifted in focus or intentionality, yet even this has failed to yield promising results. The main weakness of large scale government aid has been its inability to connect with the poor themselves, at the local level, and on their terms. In fact, it is the large-scale of the development industry itself that hampers its ability to remain flexible and accessible to the poor. Fifty years have led to a growing development industry, and along with that growth, comes unfettered bureaucracy that contributes to the lack of improved conditions for the poor. The best solution for a failed project is not to invest in it more but to reduce or eliminate it. Likewise for the U.S. development industry, the best method of eliminating the rampant bureaucracy now hopelessly embedded in the system is to eliminate the development industry itself and to concentrate any assistance to the humanitarian realm (i.e. money for natural disasters, genocides, or other emergencies). The challenge of poverty is best understood by those who live with it daily. Microfinance Institutions (MFIs) that are deeply connected to the poor, are able to rapidly respond to their changing needs. These needs in turn are responses to the challenges of poverty. For an MFI, these challenges involve understanding what exists, deciding on an appropriate role, designing in relation to local circumstances, focusing on sustainability, and being willing to learn from experience. Responding effectively offers the prospect that microfinance interventions will play an important role in reducing poverty. Furthermore, when not only government funding, but government attention is placed on successful microfinance programs, the challenge of poverty will meet an equally powerful and pervasive condition among the poor: the desire for self-improvement.
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Keywords
microfinance, microcredit, US Aid, developmental aid, foreign aid, Grameen, Honors College
Citation
Molina, D. (2006). Pathways out of poverty: How microfinance can revolutionize U.S. foreign aid to the developing world. (Unpublished thesis). Texas State University-San Marcos, San Marcos, Texas.