Microfinance: An Overview

By: Sam Crawford-Cloonan
Sam is a participant in the Emerging Leaders in Philanthropy: Explorers class. 

Microfinance is when many donors, each giving a small amount, loan a relatively large sum of money (say, a thousand dollars) to an individual in need (usually in a developing country) in order to make a significant development in that individual's life. The development helps the individual pay off the debt incurred from the loan, and the money is given back to the donors.

I, personally, would invest in microfinance because it's an efficient and effective way of improving the quality of life (QL) of someone in need. The micro-entepreneurs are then able to break the cycle of poverty. Most of those asking for loans have just enough resources to support themselves  sufficiently, but not enough to improve Quality of life. This leads to a lack of ability to support oneself.

Individuals receiving microfinancial loans become able to support themselves and improve their QL. Loans are also more beneficial than a hand out because there is the added responsibility of being able to pay money back, thus the money is required to be used as a means of financial development rather than directly being used for day-to-day support.

For investors, microfinance is a way to give help to someone in need while still being able to make their money back. In that way, it's a very safe investment. A person can donate time and time again as their funds are replenished by micro-entrepreneurs who pay back their loans. Thus, if managed properly, the exchange is fully sustainable.

In conclusion, microfinance is a necessary part of today's world when it comes to linking local philanthropists to global issues on an individual scale, making the 'treasure' section of the pillars of philanthropy (giving time and talent and treasure) easily transferable and available. The next step? Bringing time and talent to that level of availability--and I'd love to see what this generation does to do so.

On an entirely separate note, my favorite experiences in ELP are the ones in which the students are able to have a natural discussion over previously discussed topics. Being able to ask questions and learn more about philanthropy, both local and global, is both necessary and freeing.