May 06, 2007

Prosperity Gospel

And so he that had received five talents came and brought another five talents, saying: Lord, thou deliveredst unto me five talents -- behold, I have gained beside them five talents more.

-- Matthew 25:20

Poverty isn't solved with donations.

-- Carlos Slim

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SOME TIME AGO, CARLOS SLIM -- the Mexican telecoms magnate worth an estimated $53 billion -- made waves when he made a somewhat snarky comment regarding the charitable endeavors of Bill Gates and Warren Buffett. Media reports said Mr Slim, who has given away billions of dollars for his own foundations, argued that building businesses was a better way to solve poverty than "going around like Santa Claus."

As much as one finds that choice of words disappointing -- charitable endeavors, irrespective of their modus operandi, should be applauded -- Mr Slim does have a point. Lao Tzu said, "Give a man a fish, and he will eat for a day. Teach him how to fish, and he'll eat forever." Left unsaid in the philosopher's maxim is that the newly-trained fisherman will not only be able to catch fish, he'll be able to sell them for other things, and grow wealth from the bounty of God's oceans.

But how do these lessons translate into the modern era, when in so many parts of the world the issue is not a lack of know-how but a lack of capital? It is a situation that appears so often through the developing world. How can the poor get ahead when they have no access to credit, and must hold what little wealth they have in what Hernando de Soto has called dead capital -- the house built without title or planning permission, the gold and appliances bought to ward off the demon of inflation? How can the poor get ahead, when what little income they have is often channeled into high-margin transactions with those one step above them on the ladder?

One very effective way is through microfinance programs, in which poor entrepreneuers are given small loans at low interest rates to help them get off the financial treadmill on which they have been running for so long. Until now, these things were handled all by the experts. But a site I recently discovered -- kiva.org -- now allows everyday people in the First World to loan capital to those elsewhere working to better their lives.

It's a pretty powerful proposition. Kiva, working with groups in the developing world, lets people make interest-free loans to small entrepreneurs. The entrepreneurs explain what they want to do with the money and set forth a plan for repayment. Eventually -- for 19 in 20 repay their loans -- the money is cycled back to the lender. Then -- and this is my favorite part -- the lender can recycle the money back into a new loan, thus helping even more people reach their goals. Since the loan is interest free, there's no tax issues, and the money one provides goes straight into a local community. Wealth builds upon wealth and all are richer for it.

But perhaps the most satisfying thing about Kiva's operation is that it is dignified.

Many of my readers, I am sure, have heard stories from their older relatives about living through the Depression, as did I some years ago. To make it through those tough times was an accomplishment. In western Pennsylvania, where my family is from, unemployment hit 40 -- 40! -- percent and men slept in abandoned coke ovens out of sheer desperation. But I will always remember my grandfather's pride that his parents were able to somehow make it through without accepting relief. Even though he never had much during his life -- and for even that he had to toil -- I think the idea of accepting charity would nonetheless have been anathema to him.

That's why I like this program -- because its design treats lenders and borrowers as equals, and lets the borrowers hold their heads high as they set out to accomplish their goals and realize their dreams. And so I have made a couple of very small loans to two widows in Mexico who have small -- but growing -- businesses. If for some reason they fail to repay me, I know they gave it their best effort. But I am confident they will repay me, and go on to do greater things. And thus, the virtuous cycle will continue.

Posted by Benjamin Kepple at May 6, 2007 06:33 PM | TrackBack
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