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October 31, 2007
Why does Microfinance work?
The short answer is that it provides the capital necessary to finance the economic growth for people who live in places that are completely closed to traditional financing options. Bottom line, microfinance supplies the demand. That's economics 101.
But I think there is something else that is intriguing about this new concept. It's indivduals giving to individuals. It's a personal connection disguised as a business transaction. No one is going to lose everything over a small microloan. In fact, it's OK to risk that amount with a possibility that you may never see that paid back.
People are emotional beings no matter how hard they try to keep it rational. A basic rule in selling is people buy from who they know, like, and trust. That is the same for commodities such as toilet paper and services such as financial planning.
I think individuals are looking for a way to make a difference. And microloans provide a way to participate in the "global" economy without having to be included in the Fortune 500 list of companies.
See how people are doing it here.
I'm curious. Would you do it?
Posted by bstroup at October 31, 2007 1:58 AM
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