Debt, Credit, and Overcoming Poverty, Pt. 1

I was going to do this all in one post, but I realized I had way more to say.

I've been reading a lot about finances and the economy lately as I think about this whole culture of debt idea I've started on. And I also have finally been able to read Muhammad Yunus' book Banker to the Poor, which I have been waiting to get from the libary for several months now. I will go on record as saying that this book is fantastic, and I'm not just saying that because fantastic is my new favorite word. It's a great story, a great message, and I would like to personally mail copies of it to every politician in the entire country. Maybe the entire world.

What I'm saying is, read it!

If you have never heard of Dr. Yunus or microcredit organizations like Grameen or Kiva, I would recommend doing some research. To summarize, the basic premise of microcredit is that given a small capital investment, someone who is currently struggling to make ends meet could develop a business that would enable them to provide for their family and expand their trade. This business would support not only the family's daily needs but also stabilize the community and spur economic growth. The proceeds from the business would go to pay off the initial microloan and be used to finance further expansion, and the profits would pay for food, clothing, housing, and education, thereby improving the borrower's quality of life, particularly for their children.

I am fortunate to have incredible parents. They are fantastic for many reasons, but one reason is that they taught me from a very young age how to manage money. I was given an allowance and taught how to tithe, save, and choose wisely what I spent. Allowances weren't extravagant, and my parents were always very good about discussing needs versus wants, long term plans versus short term pleasure. When I was 12, they told me that since I was old enough to work, I would no longer get an allowance. (By work, they meant babysitting and paper routes, don't be thinking they were breaking child labor laws here.) So I worked on building a good clientele of parents who valued my child-managing expertise and then added a paper route when I was 13. When I was 15, I bought my first car with cash. When I was 16, I graduated high school and took on a larger route. I worked nights through college, paying my own way, with the help of scholarships and a few thousand in student loans (the loans covered the amount that tuition rose each year, the infamous 7.7% hike at SPU). While I'm no millionaire or brilliant economist, I feel pretty stable financially, able to give freely to causes I support, and splurge occasionally on theatre tickets or eating out with friends.

In a lot of ways, that allowance that my parents gave me was a huge investment in my future. That five dollars every two weeks became a way for them to teach, and a way for me to learn how to handle money. That push into the "workforce" of babysitting and paper routes taught me to be a professional, to manage my income, to utilize savings (as small as it was). Each step along the way created an opportunity: savings from my first paper route enabled me to buy that first car, which enabled me to get a larger route, which enabled me to go to college, which enabled me to get the management job at the newspaper, which enabled...so on and so forth. The investment of my parents got me started on my journey to financial independence.

In poverty-stricken countries, parents can't give their kids an allowance. They can't give their kids enough food. There is no first step on their staircase to financial independence. Yunus' stories of giving microcredit to poor mothers show how we could be giving people that first step. We could give them that first five dollars and help them utilize it. We could encourage them to find their personal skills and strengths that will create the best return on that five dollars. Then they would be able to invest, both in their children's present and their future, and thereby, the future of their country.

If you have ever read anything by Jeffrey Sachs (I highly recommend The End of Poverty as required reading for anyone interested in global economics), he will tell you that one of the basic causes of national poverty is an inability for their people to invest in future growth. Dr. Yunus' program answers that need in what was at the time a completely unique way. His stories are inspiring and show an idealism grounded in practical application. I only hope that his example will challenge others to continue working to empower people all over the world.

Part 2 is forthcoming-my last commentary on debt and the economy (at least for awhile).


For more info on microcredit around the world and here in Seattle, check these out:

Grameen

Kiva

Washington CASH