The economic progress over the last few decades, especially among emerging economies has been impressive by any measures. Despite technological and economic progress on a worldwide scale, poverty and class-divide continue to be major challenges and even trillions of dollars of aid has done little to alleviate the sufferings of the least well off members of global community. Fortunately, some individuals and organizations have come up with innovative and resource-efficient solutions to improve the lives of the poor one of which is microcredit lending. Microcredit lending should be embraced on a wider scale because the solution to reducing poverty is not to provide relief but help poor people actually stand on their feet.

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Microcredit lending helps reduce poverty by not providing temporary relief to the poor but by trying to help them to become economically self-sufficient. The principle is the same as a famous saying that giving a man a fish feeds him for a day but teaching a man how to fish feeds him for lifetime. Most of the lenders take into account the credit worthiness of the borrower when lending funds which is why poor people with few assets have difficulty obtaining loans that may allow them to start a business. Microcredit lending solves this major issue by specifically targeting poor people who may not be able to get loans anywhere else. Even repayment schedule is designed to minimize the burden on the borrower which increases the probability of full repayment. Another positive thing in microcredit lending is that it is not limited to financial assistance only but also education and guidance in setting and managing a business (CBC News).

Gender equality has not been achieved even in the west yet alone in the east and microcredit institutions such as Grameen Bank are doing a great job to help improve the conditions of women in their respective countries. By Grameen Bank’s founder Muhammad Yunus’ own admission, 97 percent of the borrowers are women because they are safer clients and have a higher probability of succeeding in the long term (Karnani). One cannot ignore the importance of better rights for women towards economic and social progress of the society, thus, microcredit institutions are not only helping poor people improve their economic status but are also contributing towards improving women social status in developing countries.

Like any solution, microcredit lending also has its fair share of skeptics and critics. One of the criticisms is that microcredit lending contributes towards gender divide because it is highly biased against men. Another criticism is that microcredit supporters have unrealistic expectations and fewer studies have been done to evaluate expectations. Some assert that free market policies and not microcredit lending will help alleviate poverty as the experiences of countries like China demonstrate (Karnani).

Alleviating global poverty is not a small feat and even Nobel Prize Committee noted that while microcredit lending will not help alleviate poverty by itself, it can make valuable contributions. Different countries have different economic and political systems and one cannot expect political and economic transparency to become a norm in every poor country overnight. Thus, it is better to rely on small steps like microcredit lending which may yield valuable results in the long term. Microcredit lending may not drastically change the fortune of individual families but even a slight improvement in economic status will translate to material benefits over generations.

  • CBC News. “Microcredit Lending: Small loans; Big payback.” 10 November 2006.
  • Karnani, Aneel. Microfinance Misses Its Mark. Summer 2007. 2 April 2014 .