Microcredit & Economic Recovery

Microcredit – providing small loans to individuals who would not normally qualify – is becoming tool of some consequence in economic reconstruction and disaster relief programs. The UN declared 2005 the year of micro-credit, and in 2006 Bangladeshi economist Muhammad Yunus and the Grameen micro-credit Bank he created won the Nobel Peace Prize. Recent reports such as this one on Gaza and the West Bank in 2007, demonstrate its growing appeal within multilateral institutions.

Nonetheless, some are skeptical. The Economist for example expressed concern about lenders who dabble in disaster relief:

“Not many microfinance institutions offer the services that people need most after a catastrophe: insurance, and access to their savings and to remittances from their families and friends. However, there is also a demand for income-generating assets—fishing-nets, tools, bicycles, stocks for a small shop, and so on—and hence for microcredit to finance them.”

Nonetheless, microcredit is becoming a more common tool and is now being made available to populations such as women, returning refugees and internally displaced people. It may give traditional banks a run for their money. As the Economist summed up: “One lesson of the year of disaster relief is about the limits to what microfinance can achieve. But a more important one is the need for more of it.”