Viewpoint: The Evolving Microfinance Revolution Has Yet to Run Its Full Course
Monday, May 4, 2015
Forty years ago, before microfinance was called microcredit, before it even had a name, I made $50 loans to 800 Guatemalan farmers in the form of six bags of 12-24-12 fertilizer, which dramatically increased their yields on the plots of maize and beans they cultivated.
Of the 800 farmers, 799 of them repaid the loans in full, plus 12 percent interest.
Over the two years I lived in San Martin, I came to witness dramatic changes in the incomes and overall standard of living of these farmers. When it came time for me to leave, many of them wept, begging me not to leave. It was a powerful experience that set me on the path I follow to this day.
Sadly, I never conducted randomized control trials against the farmers who didn’t participate in this program, so I don’t have hard evidence of “causation.” Maybe the 800 farmers got ahead of their neighbors due to some other factors, like they were smarter, had better land or were better farmers. For me, it was enough to trust my ears and eyes: When I first started working with these farmers, most were in rags and their families on the verge of starvation. By the time I left, only two years later, their children were eating better, they dressed better, and they viewed the future with optimism rather than despair.
Years later, John Hatch — my partner in our consulting firm — and I started FINCA International, a nonprofit dedicated to spreading the power of microfinance to poor communities worldwide. Today, we have close to 2 million clients and a billion-dollar loan portfolio in 23 countries in Latin America, Africa, Eurasia and the Middle East.
But when we first started, we had to combat a number of myths about poor people and money. The first was that poor people can’t take loans because they won’t be able to repay. The idea was that the poor were starving to death, so they would immediately channel anything you gave them into consumption and not pay you back.