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Sorry I missed this very important event—the giving of the Nobel Peace Prize to Muhammad Yunus of Grameen Bank for his pioneering work in micro-credit. When I was in the Peace Corps, the conventional wisdom was that poor farmers—poor people in general—were terrible credit risks and could/would not pay back loans given them to lift them out of poverty. So the paradigm was to grant them money—just give it—because the only difference between rich and poor was, well, just money. This was very Ford Foundation-think.
Didn’t work very well, as we now know. Government bureaucracy and corruption absorbed most of the grant money. Micro-credit works because it is designed specifically for local entrepreneurs, most of them women, within local markets.
But—here’s a controversy for you—does micro-credit really work? My economist colleague Mike Mandel tells me there are lots of economists who think micro-credit is all heart but no result. He wants real numbers showing how much of the loans outstanding are really paid off. And he wants to know how you differentiate the benefits of the micro-credit program of Grameen Bank from the overall economic growth sweeping through India these past years.
Very interesting questions.
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