Monday, February 25, 2008

Microfinance and India: Second of .....

Thanks to Ben Casnocha for pointing me to the Becker-Posner Blog which provides a skeptical view of the impact of microfinance while examining the subject of microfinance in greater detail. I stand corrected about my earlier statement:

Microfinance is a proven way to alleviate poverty in the world.

Nobel Prize winner Gary Becker's statement on one of the blogposts is as follows:

The evidence for the efficacy of microfinance in stimulating production and alleviating poverty is so far anecdotal rather than systematic. The idea of borrowing one's way out of poverty is passing strange. And I am unaware of any historical examples of nations that climbed out of poverty on the backs of small entrepreneurs financed by credit.

I will take an Economics Nobel Winner's word rather than mine in this regard!

Another blogpost by Gary Becker provides a succint view of the factors involved in a country pulling themselves out of poverty:

Yet, all economists who have studied microfinance agree that it will never be more than a minor factor in ending poverty in any country. Economic growth requires secure property rights, encouragement of private enterprise, openness to international trade, stimulation of education, limited and sensible regulations, and reasonably honest government. Microfinance makes only a small direct contribution to any of these variables.

Becker-Posner blog makes it to my must read blog list. With the amount of reading I am doing on the subject of Economics, I wonder if I will qualify to be an "Economist" soon.

Guy Kawasaki provides his take on Kiva in his customary top-ten list format; in this case, it is The six lessons of Kiva.

One thing that came on my mind while I was pondering on this post is the fact that I borrow heavily from Ben Casnocha's experience and knowledge, as available on Ben's blog, Ben's bookmarks, and from his book on Entrepreneurship My Start-up Life. Yet I haven't really thanked him enough for all the insights that have helped me immensely. That topic deserves a post of its own, and I will get to it during this week.

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