Is Microfinance a Bad Thing?

It’s time for some guest blogging, and our first participant is Elmira Bayrasli, the Director of Corporate Partnerships & Outreach at Endeavor, a New York-based non-profit supporting high-impact entrepreneurship in emerging markets. Before joining Endeavor, Elmira was the Chief Spokesperson at the OSCE Mission to Bosnia and Herzegovina.  From 1997-2000 she was a Presidential Appointee in Secretary of State Madeleine Albright’s office.

Elmira was a participant in our Atlanta deep dive last month, and in it she engaged in a stunning discussion about the negative effects of microfinance. Here are her thoughts on that discussion.

Bono was booed recently at a conference on Africa, says Nicholas Kristof in a recent column in The New York Times.  “Several Africans scolded him for demanding more foreign aid, saying that’s not what Africa needs,” he writes. 
 
Exactly.  Africa has tremendously talented minds. What the continent doesn’t have is fair access to opportunity, which prevents those minds from innovating and improving their quality of life.  Aid has been a necessary measure in Africa.  But as disease, famine and war become more widespread throughout the continent, it can not continue to be Africa’s only option. 

At last month’s GIO deep dive in Atlanta, I was certainly energized by the many voices who spoke about the need for Africans to get away from aid dependence by supporting entrepreneurship.  But I was blown away by the chorus who demanded that it was imperative for Africans to get beyond microcredit and microfinance. 

Microfinance has enabled families throughout Africa, and beyond, to gain control of their own income.  But these small loans haven’t “made poverty a museum piece,” as the Nobel Laureate Muhammad Yunus envisioned.  These small enterprises yield 3-4 jobs at the most, and are rarely sustainable.  Developing economies need to create sustainable businesses that will expand jobs and inject wealth into the community. 

The Atlanta Deep Dive posed the question: “Why does innovation matter?”  Innovation generates ideas, which creates new businesses, which leads to jobs.  The real question should be, “How do we let innovation flourish?  How do we allow bright minds to create new ideas and solutions that will address the issues of poverty, conflict and inequality?” 

Innovation really matters because it leads to transformation.  And this is what Africans need – individuals who will think big and put ideas into action that will lead to change. 

Today, Africans are running businesses that produce world-class coffee and handicrafts and offer globally-competitive services.  They’re using both traditional and technical means to make it happen, and have the potential to scale their endeavors.  The obstacles they face, however, are enormous.  Rather than aid, these entrepreneurs need mentors, access to networks and role models to get them to the next level. 

There is no lack of entrepreneurial role models in the United States.  From Steve Jobs to Bill Gates, young people throughout America find inspiration from their example.  Young people throughout the world should “dream of being inventors,” as Thomas Friedman points out.  It is vital that whether in Africa or Alabama, children grow up in a society which empowers and enables them to think big and believe in themselves. 

That’s why innovation matters.