Tuesday, June 2, 2009

Microsavings? NYT Blog Post

This blog post from Nicholas Kristof argues that microlending should be supplemented by microsaving.

"many poor people must pay to save. That’s right — instead of receiving interest for depositing their savings with someone, they have to pay interest on their own money. One common scheme in West Africa, for example, charges an annual interest of 40 percent for accepting savings."


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  2. This type of structural barrier creates a struggle that microfinance cannot overcome, even if it is executed perfectly. If the interest rate is at -40% every year, anyone would be detered from saving money.

    Banks accrue profits through people not paying their bills on time and through interest rates. But if a majority of the population default on their credit, the bank has no means of paying people back their savings.

    Africa needs accountable legitimate banks if it hopes to overcome the cycle of poverty. People storing their life savings in a coffee tin in their apartment only invites crime and devastation. Without a safe place to store money, no one will be able to become wealthier and reach the long term goals of sustainability that Kiva and other microfinancers aim to accomplish.