Micro-finance is a very popular discussion in many emerging countires as its innovation allows impoverished people to take out loans to develop a business and begin their own personal savings. Many poor people in Africa are not involved in the traditional banking system because many believe it to be too risky and it is simply too much to pay for due to the (as many poor people would see it)extravagant initial payment it costs just to open a savings account.
Banerjee and Duflo argue from both perspectives about how there are arguments for and against micro-credits. The authors believe that micro-credits have the potential to jump start their future, as it makes people think about their long term goals and gives them more incentive to try harder. Receiving a loan takes a lot of stress off of peoples shoulders when it comes to starting a small business. It provides some leeway and possibly some psychological comfort knowing that you have the money to pay for certain expenses. Many of the impoverished people who are taking advantage of micro-credit have a great chance of getting on their way to starting a small successful business.
Although there is great opportunity that comes from micro-credit, it often requires a lot of unwanted time and energy invested into the process. Banerjee and Duflo talk about how while starting a business from loans, people must take it one step at a time to reach their long-term goal. However, it is not always that easy. It is exceptionally hard for poor people to dedicate so much time and effort when the long-term goal seems so far away. The authors explain how many people who don’t take advantage of micro-credit are unable to do so because they know that, other than time, starting a business comes with other costs. It is hard for many people to start a business when they realize all the implications that come with it, such as paying other employees and simply finding good ways to sell their product or make profit. All of this pressure takes a tole on many people psychologically and many people do not think it is worth all of the sacrifice.
It is easy to judge and wonder why people are not taking advantage of micro-credit and other “low hanging fruit”. However, when looking from a different perspective, I realize that it is much easier starting a business and living a “successful life” when everything is taught to me and I am basically steered my way through life. Banerjee and Duflo explain how many poor people do not get the same opportunity in knowledge and education. Therefor it is a lot harder for impoverished people to take such a big step towards their future when it seems so challenging and far away.
Micro credit is making a huge impact in Mali. IPA (Innovations for Poverty Action) conducted a study to determine if micro-credit was beneficial or not. Since agriculture is the primary job in Mali, The IPA organization granted loans to many agricultural farmers at the beginning of the farming and was expected to be paid back at the time of the harvest. The article states “the evaluation of this program studied whether agricultural microfinance can help relax constraints to technology investment among smallholder farmers in rural Mali through offering credit, either in loan or grant form. The results show that giving some farmers unrestricted cash grants led to significantly higher productivity and profits, suggesting farmers would invest more in their farms if they had more capital” (Innovations For Poverty Africa). The research study shows that agricultural loans attract clients with a great ability to grow their farms and is a great way to get farmers off of their feet and begin making money.
One organization that stands out is Ecova Mali. Since farming is the main occupation in Mali, Ecova Mali helps with grassroots development for farming. Ecova Mali provides teaching and loans to help get businesses started. What makes Ecova Mali so special is that it doesn’t just lend entrepreneur’s money. It provides them with ways they should go about starting their farming business. Another article explains how before 2003, micro-credit was only successful in Southern Mali as opposed to Northern Mali. However, many people, especially community leaders, are beginning to take more intelligent approaches to starting their businesses and are having success. One of the business organizations, “Association Dourey-Timbuktu (DOT)” is a microfinance institution licensed by the government that is helping communities around the city of Timbuktu that has helped establish over 500 greatly needed businesses. Implementing the proper usage of micro-credit has made a positive impact on Mali.
Digital Technology is making a big difference in Mali. In the Sahel region, Mali leads when it comes to mobile penetration as it has a rate of 119%. Over four million Malians make mobile payments, which are drivers of financial inclusion. Since technology is making a big influence in Mali, the government has implemented a plan called “Mali Digital Plan 2020” as it seeks to bring more technology into its country because it will provide more job opportunities. The government said “the policy will help reorganise the digital economy, boost economic growth and create jobs, among others. The government also said that the digital plan will focus on the following areas: expand the access to digital networks and services, develop production and digital content, diversify digital use and services, strengthen the existing legislative framework, develop human capital, and develop local digital industry” (Mali Digital Plan 2020, 2014). If the plan is successful and digital technology continues to increase, Malian businesses and economic growth will prosper.
“Mali Digital Plan 2020 to Reorganise Economy.” BiztechAfrica. N.p., 09 Dec. 2014. Web. 22 Feb. 2017.
Banerjee, A. & Duflo, E. (2011). Poor Economics.
“Agricultural Progress in Cameroon, Ghana and Mali.” Innovations for Poverty Action (2008): n. pag. IPA. Web. 21 Feb. 2017.