Oxfam micro-loans

[fivemack]

From some junk mail they've just sent me, it appears that Oxfam are going into the micro-credit business; they want me to help capitalise them so that they can make £25 loans to create small businesses in (initially) Sudan and the tsunami-struck bits of Sri Lanka.

I recall rezendi's fulminations about the aid industry in general; the bits of the third world I've been to are clearly not in as much a mess as Sudan or Sri Lanka, but the impression I had is that what they lacked was in fact capital, and this seems to me a reasonably sensible way to provide it.

But there are those reading who know more about aid than I; is there some nasty catch here? Less-than-entirely-ethical investments (Russian oil in particular) have been remarkably good to me over the last year, and to have Lukoil, Rio Tinto Limited, PetroChinaCo and Walmart-de-Mexico pay to capitalise roti-makers in Batticaloa Province seems somehow appropriate.

Comments

[senji.livejournal.com]

This is kind of the venture-capital version of lending people goats?

[purpletigron.livejournal.com]

My general feeling is that micro-credit == good. But any good principle can have a bad implementation...

[scat0324.livejournal.com]

I don't know what Oxfam are doing different to Opportunity International (http://www.opportunity.org.uk/), but I know their work is pretty good. UK stuff is Oxford based, and I know some of their staff, but I don't know too many details.

[ewx.livejournal.com]

There was an Economist article about micro-credit a while back - I don't recall if you have online access to their archive but if so it might be worth your while looking for it.

[dd-b.livejournal.com]

My general impression of micro-loans is very favorable. I'm pleased to see them going mainstream -- but that does mean we get to find out if they actually work in the mainstream. From what little I know, far worse people than Oxfam could be trying it out.

I remember at least one of the articles I've seen was on a program that loaned only to women, so that may have distorted their results (made them different from what a general program would see, I mean).

[rezendi.livejournal.com]

Microcredit is a great idea. But I'm a little bit suspicious of microcredit as provided by well-meaning Westerners.

Grameen Bank, which introduced microcredit, was created by a Bangladeshi professor, is 94% owned by Bangladeshi stakeholders, does a lot of good, turns a profit virtually every year, and has successfully expanded outside Bangladesh; more power to them.

Alas, there is no African equivalent, and one possible problem with Oxfam providing microcredit is that they might shoulder out African-owned, African-financed microcredit banks; they would have a major competitive advantage by a) being not-for-profit b) operating at a loss by taking donated Western money. This depends on the relative levels of supply and demand for microcredit, of course, which I don't know anything about; maybe there's enough demand for capital that there's space for everyone. And even if Oxfam's microcredit did hurt/prevent the existence of competing African banks, its net benefits might still well be positive. But you should at least be aware that some of the usual negative side effects of aid still apply.

That said, I would certainly recommend this above almost all other forms of direct aid.