Author Archives: Bobbie Jo Traut

Providing the poor with access to credit at reasonable interest rates does seem to be a panacea for alleviating poverty. With credit, a person can produce a good or provide a service that will generate an income with which basic needs can be met. Credit also allows a person to utilize their talents, skills, and initiative to fill a niche in the market, spurring economic and entrepreneurial growth in a community and country. In rural Guatemala, for example, a woman bakes bread every morning in a stove bought with a small loan and sells the loaves to a shop in her village. In Nepal, a man buys five water buffalo with a small loan and sells the milk each morning to his neighbors.

Though it is difficult to estimate the affect of such micro-entrepreneurial activities on a country’s overall GDP, the impact on individuals and society is immeasurable. Small loans stimulate private entrepreneurship and expand economic freedoms crucial to building a market economy and democracy. They empower the poor with the freedom to make choices regarding how they use and save their income. If spent on food, health care, shelter and education, individuals can more easily escape the poverty trap. Raising the income level and standard of living among the world’s poor also builds a middle-income class that is more able to participate in civic activities and demand greater accountability from the government.

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