[p2p-research] The failure of micro-credit?

Samuel Rose samuel.rose at gmail.com
Mon Aug 24 16:01:14 CEST 2009

On Mon, Aug 24, 2009 at 9:41 AM, Ryan Lanham<rlanham1963 at gmail.com> wrote:
> Michel,
> I concur with all you say...could have written it.  I too am puzzled by
> Sam's response but it is consistent with the Yale research.  I am currently
> scratching my head hoping Grameen and the now thousands of other
> microfinance organizations step up to respond.  It is a profound challenge.
> I spend a portion of almost every day making microfinance loans.  It would
> hurt deeply to find such work is not only not helpful, but is indeed
> hurtful.  I find it hard to believe...along lines you suggest, but that is
> the current and loudest research finding on the topic from a top scholar and
> a respected institution.
> I literally don't know how to respond.  I have traded messages with Africans
> who have found their loans to be transformative...the possibility to thrive
> and get out of poverty.  How can this be?
> Ryan

My response was actually a bit off-topic to the issue Ryan raised of
whether microfinance loans are currently actually helping people.

I am, and have been for a few years,  just trying to advocate for
other possible methods to solving problems beyond lending and credit.
I am not 100% against loans, and am in fact have paid off many loans
in my lifetime. Plus, I have lent money via microcredit systems

My response was not meant to condemn the practice of microfinance. I
can imagine that at least thousands of people have genuinely benefited
from micro loans.

My standing question is more like: why don't people see these
countries and people as worth actually investing in? Not investment by
way of lending, but investment by way of creating localized funds.
These funds could be owned and controlled by the local people. The
funds could also issue shares that anyone world wide could purchase.
The fund entity could also issue one or more local currencies. it
could also become a service that collects and disseminates data about
conditions, financial and otherwise, in a local area. (this is similar
to the solari model)

All of that being said, microcredit is probably the easiest system to
start right away in some of these places. I can definitely see how
many people can benefit from micro credit. Ryan, if you have received
confirmation from individuals that loans have truly helped them, then
it is possible that micro lending helps some, but possibly has
negative side affects in some cases. This would seem normal really.
Most patterns for solving problems will need to be adjusted for local

So, perhaps what I am saying is that, depending on what they goals
are, micro credit should not always be looked at as the "solution"
when the need for money is involved. My focus may also be more US
centric. In the US, so many people are so far into unsustainable
depbt, that most alternative finance solutions completely avoid the
concept of lending and debt.

> On Sun, Aug 23, 2009 at 9:28 PM, Michel Bauwens <michelsub2004 at gmail.com>
> wrote:
>> hi Sam,
>> I'm puzzled by your 'total' opposition to credit. Even most monetary
>> reformers/transformers recognize the difference between turnover credit, and
>> investment credit. They usually say the problem is that contemporary money
>> conflates them, and that a proper separation is better. In fact, people like
>> Thomas Greco advocate, convincingly that a mutual credit clearing system
>> would be much superior to the current money system.
>> I don't think the bangladeshi women would have access to any pools in the
>> first place ... However, they could issue their own currency/credit clearing
>> system for their own exchanges, bypassing the need for 'bank's and
>> debt-based money.
>> I've never seen microfinance as a panacea, but from the documentaries I
>> have seen, there is a huge boost in the dignity and collective identity of
>> those particpating, at least in the good schemes. Isn't the problem that
>> microfinance has become commercial, with outfits such as in mexico now
>> asking interest that is even higher than normal banks?
>> Michel
>> On Sun, Aug 23, 2009 at 11:32 PM, Samuel Rose <samuel.rose at gmail.com>
>> wrote:
>>> Ryan wrote:
>>> >Date: Sun, 23 Aug 2009 11:11:47 -0500
>>> >From: Ryan Lanham <rlanham1963 at gmail.com>
>>> >Subject: [p2p-research] The failure of micro-credit?
>>> >To: Peer-To-Peer Research List <p2presearch at listcultures.org>
>>> >Message-ID:
>>>        <9134ad230908230911l2d535155n36ee5bef301a8934 at mail.gmail.com
>>> >>
>>> Content-Type: text/plain; charset="iso-8859-1"
>>> >Editorial note:  I am big advocate for micro-credit.  I am saddened by
>>> > this
>>> >study, but cannot disprove its findings. One big P2P ideas seems
>>> > inherently
>>> >flawed.
>>> > >http://www.3quarksdaily.com/3quarksdaily/2009/08/does-microlending-really-help-the-poor.html
>>> >Ryan
>>> I have to agree with this. All the way back in 2005-2006 when
>>> BarCampBank http://www.barcampbank.org project first really took off,
>>> I was one of the only people advocating against debt-creating
>>> mechanisms (like micro lending).
>>> Resource pooling, coupled with targeted investment are the way to go,
>>> if money is to be involved. A pool of money could be created, which
>>> could then pay out when projects meet and sustain a criteria that is
>>> defined by the investing group. This is similar to C.A. Fitts "solari"
>>> model. The investing group could work this similar to "bounties". Or,
>>> could take a different approach with impoverished people and lower the
>>> barrier to encourage community cooperation towards co-creation of
>>> local basic needs infrastructure.
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>> --
>> Work: http://en.wikipedia.org/wiki/Dhurakij_Pundit_University - Research:
>> http://www.dpu.ac.th/dpuic/info/Research.html - Think thank:
>> http://www.asianforesightinstitute.org/index.php/eng/The-AFI
>> P2P Foundation: http://p2pfoundation.net  - http://blog.p2pfoundation.net
>> Connect: http://p2pfoundation.ning.com; Discuss:
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Sam Rose
Social Synergy
Tel:+1(517) 639-1552
Cel: +1-(517)-974-6451
skype: samuelrose
email: samuel.rose at gmail.com

"The universe is not required to be in perfect harmony with human
ambition." - Carl Sagan

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