San Diego State University’s Independent Student Newspaper Since 1913

The Daily Aztec

San Diego State University’s Independent Student Newspaper Since 1913

The Daily Aztec




San Diego State University’s Independent Student Newspaper Since 1913

The Daily Aztec

Microlending is ethical way to give foreign aid

Artwork courtesy of Opinion Editor Tom Hammel

There’s an old Chinese proverb that states, “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” It’s a simple proverb, one that promotes independence above reliance. Unfortunately, it’s a proverb the U.S. could stand to take a little more seriously.

The U.S. is the largest distributor of financial aid out of any country in the world. We’re a giving country — nearly $29 billion a year in untied aid goes to outside countries, in addition to the undisclosed billions in tied aid we send. But don’t pat yourself on the back for what your tax dollars have done just yet. There’s a dark side to the aid-giving business.

Listen up, Bono — the U.S. does nearly as much harm as good when it comes to humanitarian aid. The countries to which we donate rank nowhere near the least developed countries — in an explicitly political move, Iraq and Afghanistan rank at the top of the list of recipients of humanitarian aid, while impoverished regions such as Sierra Leone, Niger and Mali receive minimal amounts of aid.

Even then, humanitarian aid destroys the economies of the countries we donate to in non-emergency circumstances. Substituting local goods with heavily subsidized goods of our own creates an all-too-common scenario: Farmers and local business owners are often put in direct competition for aid given by the U.S., and are often put out of business by goods that are $1 or $2 less. Of course, that’s only considering the money and goods that make it through corrupt Third World governments and bureaucratic hoops accompanied with tied aid.

I’m not suggesting there aren’t times that require aid. I believe in emergency situations — or even circumstances in which a country legitimately cannot take care of its people — tightly monitored and distributed aid can do a lot to help keep starving citizens alive. But giving aid is first and foremost a business.

Tied aid, simultaneously the most deplorable version of aid-giving and the majority of the aid we give as a country, legally restricts the U.S. to use its own transportation for 75 percent of the aid. This practice costs more than the food itself. Tied aid exists so donor countries can hold on to the export market; in other words, it essentially keeps developing countries from developing.

As a country, we should strive to help developing countries end poverty. But this all-too-common approach of throwing money at a problem and expecting it to resolve itself is as tired as it is hopeless for the people living in those countries. We’re running out of proverbial fish; it’s time the U.S. tried another approach to combat poverty in developing countries.

That’s where organizations such as Kiva — and you — come in. Founded in October 2005, Kiva is a nonprofit microlending organization that designates loans for people in Third World countries trying to expand their businesses. For loans starting at $25, you can, for example, help a man in Peru expand his bakery into a bread delivery business, providing him enough capital to buy a bike.

Because the loans have little or no interest, business owners are able to fully pay back these loans soon with the profit from their business, with startling results. Nearly 99 percent of all loans funded from Kiva are fully paid off — paying back investors and allowing them to reinvest in another business owner on Kiva, if they so choose.

These aren’t handouts, nor is this a way of funding the poor out of some kind of misplaced pity or sense of entitlement. Kiva empowers business owners, encouraging them to work to pay off the loans they receive. Better yet, for the cost of a night of drinks, you can help someone develop a business enough to hopefully launch themselves out of poverty. And once you get back your initial $25, you can decide to reinvest again. And again.

But Kiva and other microlending businesses are only one of the ways we should work to tackle global poverty. “Microlending can be a good alternative, but only to a certain extent,” San Diego State political science professor James Samstad said. “It may help the poor establish micro-enterprises … and break away from a potential long-term dependence on aid. Of course, in the case of a famine, it would do little to relieve the immediate crisis.”

There is no cure-all solution to ending poverty, and there are certainly problems with giving loans to a select few candidates deemed worthy of receiving money to jumpstart their businesses. But as a country that believes so passionately in the goodness behind capitalism, we should work to empower developing nations — and businesses — rather than impoverish them.

—Chris Pocock is a journalism junior.

—The views expressed in this column do not necessarily reflect the opinion of The Daily Aztec.

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San Diego State University’s Independent Student Newspaper Since 1913
Microlending is ethical way to give foreign aid