Some good news out of Africa

I remember reading about "microloan" operations in third world nations back in the early 1980's and thinking that it had immense possibilities for improving the lives of impoverished people. It's exactly the sort of thing that governments don't want to touch: the amounts of money are microscopic, there's no big media reward for getting involved, and there are no photo-ops for presidents, prime ministers, and CEOs. All it does is provide the kind of help that seems to work the best:

K-Rep gives tiny microloans to people who are too poor to be of interest to conventional banks, who always demand collateral in the shape of a vehicle or real estate in case the loan is never repaid.

Because the poor have no collateral to pledge, they tend to stay poor. All over the world, poor people are denied the loans that may help them get onto them up the business ladder, like Mr Siasamallisi did.

K-Rep is not itself a charity. It charges a market rate of interest and demands repayment of the loan pretty quickly.

But instead of demanding substantial property as collateral, K-Rep follows the Gramin principle made famous by the microcredit bank of the same name in Bangladesh.

It uses the assets of the poor in place of property, in particular poor people's reputation.

K-Rep's lending officers go out into the shanty towns to speak to friends and neighbours of the would be borrower.

Often the loan is extended to a group of people, acting as cross-guarantors.

This is precisely the people who need access to funds, to create their own businesses, or to expand existing ones. Pouring billions of dollars into the central government of a third-world country gives the sort of big-ticket, big-media, photo-op-rich splash that lending governments love: they reap huge PR benefits, regardless of the actual success or failure of the dam, power plant, manufacturing facility, or what-have-you. And that's a positive outcome compared to the platinum-plated Mercedes fleet, the squadrons of high-tech fighter-bombers, or the other kinds of ill-advised purchases indulged in by president-for-life types.

Hat tip to James Bryant for the link.