COMMENTARY: Microfinance Empowers the Poor, Challenges Effectiveness of Charity

c. 2005 Religion News Service (UNDATED) Why are so many people in the world poor? Are they just lazy or have they missed out on economic or social opportunities so many of us take for granted? The debate over the roots of poverty has continued for thousands of years. Even Jesus said, “The poor will […]

c. 2005 Religion News Service

(UNDATED) Why are so many people in the world poor? Are they just lazy or have they missed out on economic or social opportunities so many of us take for granted?

The debate over the roots of poverty has continued for thousands of years. Even Jesus said, “The poor will always be among us,” a quote used by some to justify the notion that poverty is intractable.


He also commanded his followers to help the poor, and the results have been mixed.

The Nov. 5 issue of The Economist magazine, with its special report on “The Hidden Wealth of the Poor,” spotlights a growing divide between those who offer charity and those who believe in empowering the poor. The magazine analyzes microfinance, the practice of providing financial services to the poorest people in the world.

What began as an experiment 30 years ago has now “established the economic credibility of the poor,” according to Bob Christen, president of the Boulder Microfinance Institute. Speaking at an annual conference of microfinance institutions in Washington in late October, Christen was among hundreds of practitioners who provide financial services to the poorest of the poor, mostly in the developing world.

In establishing that credibility, the practice of microfinance has now hit a watershed. The poor are now seen as a market, fueling debates within the philanthropic community over how formalized the practice of microfinance should be.

About half of the groups in the organization are faith-based and see their work as an extension of ministry. “We’re do-gooders,” said Allan Sauder, president of Mennonite Economic Development Associates (MEDA). “We don’t apologize for who we are or what we believe in.”

Like most of the other faith-based groups, Sauder is quick to add that while those beliefs motivate their work, there are no religious strings attached to the loans they provide to the poor.

The small loans provided by MEDA, Opportunity International, World Vision and other Christian groups, along with those of more secular organizations, have begun to attract attention from some of the world’s largest financial players. Citigroup’s foundation helped underwrite the conference, and one of its risk management associates also attended, openly seeking investment opportunities.


The Economist distinguishes charitable endeavors from formalized financial institutions _ the wave of the future, according to most practitioners.

The article asserts that microfinance is a far more viable antipoverty effort than “international aid and debt forgiveness, which are essentially top-down rather than bottom-up and have a decidedly mixed record.”

Opportunity International, based in Oak Brook, Ill., is the only Christian organization mentioned in the article and one of the few faith-based groups to move toward formalized financial institutions.

Formalizing means establishing regulated institutions that provide not only loans but also savings, one of the greatest challenges for the poor. Without a safe place to save money they earn, the poor often find it impossible to move out of the cycle of poverty.

Opportunity International sees its mission as not just one of economics but of spiritual transformation. “We have a triple bottom line,” says Larry Reed, president of the Opportunity International Network. “We want to be economically sustainable but we also want to work with the poorest of the poor and see holistic transformation.”

And that’s the rub.

By demonstrating that the poorest of the poor are, in fact, capable of being transformed into self-sufficient entrepreneurs, do-gooders have attracted the interest of those who hope to do well.


Some Christian groups, like World Vision, are less inclined to move toward formalizing their microfinance work, instead concentrating on supplying small loans, primarily to the communities in which they do other development work. Other multi-sector development groups are moving out of microfinance, unable to meet growing regulatory requirements in countries where they work.

But groups with more formal networks can attract investments from large capital institutions, thereby making a greater dent in poverty and bringing transaction costs down.

Christen, who has worked in microfinance for 25 years, is unfazed by the debate. Although he notes that “formalizing is complex” he also says that one of the greatest benefits of the microfinance movement is proving to the world that “the poor can take responsibility for their economic situation.”

With repayment rates that make commercial bankers envious, most microfinance organizations have proven that by blessing the poor with a small loan, they are reaping the rewards not only in heaven but on earth.

RB END RNS

(Dale Hanson Bourke is a consultant to humanitarian organizations and the author of “The Skeptics Guide to the Global AIDS Crisis.”)

Editors: To obtain a photo of Dale Hanson Bourke, go to the RNS Web site at https://religionnews.com. On the lower right, click on “photos,” then search by subject or slug. If searching by subject, designate “exact phrase” for best results.


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