For a while, microfinance was the hottest trend in global development, promising you could change a poor person’s life with a very small loan. Let them start their own business and get your money back. Then you can go on to transform someone else’s life. Though the promise was not fulfilled, new uses are being found for microloans, ideas we may be able to apply to our own favorite causes.
Though microfinance did not, in fact, solve global poverty, it wasn’t a complete failure either. Under the right circumstances, it does seem to improve conditions for some poor people.
This month, a new study affirmed that finding in an unlikely place: New Jersey.
The Grameen Bank, one of the pioneers of microfinance, which has been operating its program in Bangladesh since the 1970s, released a study on one of its programs in New Jersey. The program works like this: Low-income women apply for a microloan as part of a small group, and all members of the group are accountable for ensuring each member makes payments (that’s the approach Grameen has found does the most to increase repayment rates).
Initial results six months into the study have been positive. “The Grameen America program produced improvements in several measures of material hardship – for example, how often the respondent ran out of money in the three months preceding the survey, the respondent’s ability to afford necessities, and the respondent’s current financial situation compared with the previous year,” the report states.