Microfinancing: Economic Self-Sufficiency
In conjunction with the center for the encouragement of self reliance we have seen first hand the social benefits of microfinance. It has served as a simple but powerful tool that has enabled the poor to pull themselves out of poverty. We have been particularly fascinated by the use of microfinance in Vietnam because Vietnamese people are overall very resourceful and entrepreneurial. Our process has been fairly simple; it involves making small loans to the working poor in rural villages. These loans are usually less than $300, and we’ve seen farmers and families establish and expand small businesses that have experienced a significant increase in their overall household income. This has allowed families to buy more food, afford healthcare, and provide education for their children. Most importantly, families can put aside savings and lay the foundation for a better future.
Microcredit has proven to provide a range of benefits that poor households highly value including long-term increases in income and consumption. The harsh reality of poverty is that income is often irregular and undependable. In Hue, we’ve seen the positive spillover effects when the poor are given credit, particularly during the merciless monsoon season, when poor families can protect their homes and community and can bear the long periods without access to food, clothing, shelter, or education. Credit has made it easier to manage unforseen calamities such as sickness of a wage earner, theft, or natural disasters. The poor use credit to build assets such as land, which gives them future security. Women participants in microcredit programs often experience important self-empowerment. Empirical studies on the impact of credit are difficult and expensive to conduct and pose special methodological problems. Most impact studies to date, however, have found significant benefits from microcredit. However, only a few studies have made serious efforts to compensate for the methodological challenges.
Picture 1.) A loan of $400,000 VND ($25 USD), enables a roadside stand to sell local noodle soup and fried sea snails
Picture 2.) Mr. Hung V. Tran’s roadside baguette sandwich stand