Below is a repost from worldvisionmicro.com. Jessie Walters makes several interesting points about how loaning somebody money can often have longer lasting effects than simply gifting it to them. Thanks for the insight Jessie!
Imagine that someone you’d never met walked up and handed you $500. No requirements, no strings attached. Just, “here, you’re $500 richer.” Sounds too good to be true, right?
Now imagine that $500 was more than you made in six months.
One of my colleagues recently shared some thoughts about GiveDirectly, an organization that takes this very approach. The idea behind their model is that people living in developing countries have a much better idea of what they need than well-meaning philanthropists from developed countries.
World Vision gets that. We too believe that you can’t know what people need without understanding their context. And we believe in giving people options and opportunity — in empowering them to make the changes that will improve their own lives. But we take a quite different approach.
So as I read about GiveDirectly — an organization that has done some truly great things — I started thinking more about the World Vision Micro model and asking “why loans?” Why doesn’t Micro just give the money as a gift? And I concluded that, by providing loans and supporting holistic development, Micro offers five invaluable things:
1. Knowledge.
In the scenario I mentioned, you’re given $500 to use at your own discretion, but up till now, you’ve been earning $2 a day working for someone else. Even if you know what you need — and even if you have a business idea — how much business know-how will you have? How equipped will you be to manage a large amount of money?
That’s why Micro gives loan recipients access to savings groups, which provide accountability and help them use their money wisely. And why it teaches them business skills. And why it supports them through other tools, like better access to information about crop prices or new markets for their products. All so they’re set to succeed.
2. Dignity.
Personally, I think this is one of the best reasons for loans. No one wants to feel like a charity case, especially people who are motivated to help themselves — the type of people Micro loves to work with. Loans help these hardworking entrepreneurs maintain their dignity because, in the end, they’ve earned everything they have.
3. Long-term prospects.
With Micro, loans are only one part of the puzzle. Thanks to World Vision’s holistic development programs, loan recipients are supported with access to other life essentials too, giving them a springboard to build a better future.
And the loan model means that entrepreneurs can grow as big as their dreams. Say with your first loan, you start selling groceries from a roadside cart. Your business does well, and you want to expand. Though you’re making a profit, it’s not enough to buy more inventory or a larger cart. But since you successfully paid back your first loan, you’re now a candidate for a second loan. With that loan, and the ones that follow, you grow your business, have the chance to start additional businesses, and create jobs for other people in your community.
4. Peace of mind.
It’s hard to know what poverty feels like unless you’ve been there. But even to the average person, a gift of $500 sounds too good to be true. And when you’ve been struggling to survive your whole life — when you’ve never even been paid a living wage — it’s hard to believe that someone would want to help you with no strings attached.
This is apparent in the response of some villagers in communities where GiveDirectly serves. They wondered if a politician was trying to buy votes, or figured that it must be some kind of trick. Thankfully, those who accepted the money were pleasantly surprised (like I said earlier, this charity is doing some great things). But I think the fear and suspicion associated with “free” are another great reason for loans. When someone is working to pay the money back, they don’t live with the constant fear that the giver will suddenly come and demand something in return.
5. More help for more people.
Micro model is a recycling system that never ends. When an entrepreneur pays back his loan, it’s put to work to help another hardworking person. When that loan is repaid, someone else benefits from a loan. So when you give to Micro, you truly have no idea how many lives you’re helping to change.
And that’s why I’m all for loans. That’s why I’m all about the partnership approach. It’s not just because I love — and work for — World Vision. It’s because individuals who receive Micro loans aren’t left on their own to figure it out. They aren’t left feeling like a one-time charity case. Because someone else believes in them, they’re more likely to believe in themselves.
If you too see the value in loans, you can show a hardworking entrepreneur that you believe in him or her.
