Can Big Things Come in Micro Packages?

Recently, the European Investment Bank (EIB) sealed the deal on an initiative to generate micro finance opportunities in Tunisia. The program, worth approximately 4 million Euros, is aimed at helping young entrepreneurs grow their business endeavors by providing them with small loans. The loans associated with Tunisia’s micro finance are, thanks to the help of the EIB, being channeled to the growing business opportunities that are both in need of the most micro finance support and that can do the most good for the greatest amount of people.

“On the other hand, in countries such as Tunisia, it is increasingly concerned to ensure that micro finance reaches all regions, and particularly the poorer regions of the country which are economically disadvantaged,” writes Peter Taberner of New Europe Online.  Micro financing is an opportunity to bring impoverished people into a better economic state, so many micro financing opportunities are aimed at the poorest parts of the world.

This map shows the percentage of people below the poverty line.
These are the people meant to be assisted by micro finance opportunities.

In the past, micro financing has been successful in countries such a Mexico, as evidenced by a 2008 New York Times article describing the success that the micro finance institution Compartamos has experienced, though the article points out the debate that micro finance success can create. According to the article, micro finance can give the lending institutions more gain than the institutions borrowing the money themselves, therefore missing the true purpose of the micro financing system. Nicholas Kristof of the New York Times is also skeptical of micro finance’s true success (particularly in Africa), meaning that the key to micro finance success seems to lie with the particular government that handles the operation.

In the case of Taberner’s article on the events in Tunisia, the EIB seems confident that its partnership with the Government of Luxembourg Directorate for Development and Cooperation will spur economic activity in the poor section of the world.

What are your thoughts on micro finance? Does it provide economic growth, or is it a way for financial institutions to enjoy greater profits while taking interest payments from borrowers?
– Dave

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