Subject: Microcredit

Here’s where commerce and social justice intersect.

When we live in Canada, or presumably in any nation that relies on entrepreneurship and the market to drive economic, social and even political growth, it is easy to make the argument that supporting entrepreneurs is a good idea. Yet, it is remarkably not the first thing that comes to mind for most if they learn of poverty, natural disaster, war, or other woeful conditions in the developing world.

Microcredit is a simple concept that generates a massive opportunity.

I might casually describe microcredit as the process of making loans to small scale entrepreneurs. This seed capital—frequently as little as $50—is sufficient to allow them to purchase the most basic means of production: a sewing machine, a bicycle, a plow. A good idea and business diligence is not limited to citizens of developed countries, of course, but with a small initial investment, an entrepreneur living in relative poverty can grow their wealth for their family and to reinvestment in their business.

I’ve described the most simple model. Of course, lack of access to capital only accounts for part of the challenges faced by entrepreneurs in developing nations. Tax, tariffs, inflation, lack of access to appropriate markets, and a myriad of non-market forces like drought, pestilence, war and corruption also throw a wrench in the works, even for those with the most focused business acumen.

However, there is an incredible history of how successful the simple model can be.

Arguably it was the Grameen Bank of Bangladesh that initially brought global recognition to the power of microcredit. Their model of loaning primarily to women yielded unheard of repayment rates (even when compared to the conservative commercial loan sector) and real success in social indicators among the poorest in Bangladesh. There are other global lenders that work the same magic: the Foundation for International Community Assistance in the US; Banco Sol in Bolivia, Fonkoza in Haiti, Calmeadow based in Canada, and a host of others.

If even the simple model works, then there is even more opportunity if the other challenges are removed. The Fair Trade movement with organizations like Transfair, Bridgehead and La Siembra is helping to develop social awareness and a proactive consumer campaign to promote global markets in which producers are paid a fair price for their products. Fair trade is now accepted by most—even if not everyone understands the nuances—as being a good thing. It has become a positive gut reaction of consumers, rather than a curious marginal concept.

Our toolbox for justice is growing.

We can consume responsibly, invest responsibly, make capital available for microcredit, support good charities and laudable business practices, we can use our political voice to advocate for fairness.