Thoughts about MicroLoans

After being bumped to first class on my flight from Atlanta to Monrovia, West Africa (Yes, you heard me right!) I was pleasantly surprised to sit next to a man from Liberia who was returning after spending two years at Harvard studying finance and in particular, microfinance loans. Ive heard of these things, sending a cow to a family and in exchange they pay for the cow through the milk it provides and after the loan is paid, the cow and the rest of its bounty goes for the family. Then there is the loans for sewing or small shops that occurs here in Liberia. Specifically there are hundreds upon hundreds of small shops that are all selling the same thing, trinkets such as hairbands, plastic shoes, knock off purses from China.

As a large port city with over 1.7 million, Monrovia exploded when the LRA (Rebel Army) came to the villages. At the time, only about 500,000 lived in the city and as the child soldiers came to the villages and killed for food, destroying everything in their path, they left the people starving. So, as time passed, the people had no choice but to move to the city- they were starving.

And thus, we have a city at crazy capacity, with not much resource (nothing to export) and well, povertous people who, at 40 now, lost everything at 20. Its been only 6 years since the war.

Back to MicroLoans: So according to this gentleman the microloans here are used primarily to buy "knock offs" and to set up small stores. The problem is that these stores are all very similar and the haggling and sheer numbers mean that although they will eventually pay the loan back (repayment is about 80%), they didnt make enough to sustain their future but instead just made it to the day they were out of stuff As such, they repeat the experience with another loan. His thought is that they need to understand investing, saving for the future I got it and he as pretty damn brilliant and it is interesting to see, now that I am in Liberia, what it really looks like and how such ideas really do affect the people.